Thought Leadership

Conservation shophouses have emerged as one of the top alternative real estate asset class over the past decade in Singapore. Besides their finite supply and vintage charm, they are among the few asset classes in Singapore that allow foreigners and companies to own boutique buildings at a palatable quantum.

Transaction volumes hit a peak of $1.9 bn in 2021 before declining on high financing costs, record price points and most recently, overhang from the $3 bn money laundering case. CBRE Research believes the underlying fundamentals for shophouses remain solid, notwithstanding certain challenges in the near term.

This report looks at the past, present and future for conservation shophouses, and recommends actionable strategies for investors.

The beginning of this year saw occupiers in Australia exhibit a more cautious approach due to the sharp rental increases witnessed over the past two years and an increase in new supply. However, demand has picked up in Q2 2024 and the number of transactions is set to increase over the next three to six months.​

In Japan, logistics demand is holding firm in regional cities. After putting expansion plans on hold six months ago, many occupiers are now moving ahead with leasing new space. However, rising vacancy is prompting landlords to fill space as soon as possible to tenants from any sector.​

Sentiment in Vietnam remains positive, backed by the government’s success in boosting the country’s ties with key trading partners, which continues to lure manufacturers from these countries to set up production bases. Factory space continues to attract strong demand, led by the electronics and automotive sectors along with traditional commodities.​

Despite the current subdued mood in mainland China, optimism is building for an eventual recovery. Several major brands have been seen seeking opportunities to optimise store networks in what is still a tenant-favoured market. Many retailers are looking to operate in a network emphasising one major flagship store per city.

Korea continues to witness a solid rebound in international visitor arrivals, which is driving up consumption and leasing demand. More demand for pop-up stores has been observed in emerging commercial districts including Seongsu, Hannam, and Dosan Park due to tight availability.

Vietnam continues to attract strong interest from foreign brands, particularly those from mainland China. More shopping malls are undergoing renovations to create space for new market entrants and provide a more memorable experience for shoppers by utilising new designs such as bigger atriums.

Mixed signs of economic recovery in mainland China weighed on investment activity this quarter. Transactions mainly focused on small lump sum assets, the bulk of which were sized at between RMB 100-500 million. Discounted assets, especially in the retail and office sectors, are expected to drive investment in the coming months.

Investment sentiment in Singapore is less negative compared to six months ago, with value-add capital turning more active since the turn of the year. Retail and hospitality properties are expected to offer more opportunities in the coming months, underpinned by solid fundamentals.

India’s investment market continues to see buoyant activity. Strong consumption is translating to solid fundamentals in the retail sector, boosting investor interest. Investment demand in the office sector has also picked up over the past six months, with domestic office funds and Singaporean capital being most active.

With the Asia Pacific hotel market continuing to undergo structural change, hotel owners and operators are fine-tuning operational and branding strategies. Increased labour and utilities costs, limited new supply, and the prolonged peak of the interest rate cycle are among the driving factors.

Our latest report explores the key trends shaping the Hotels & Hospitality sector in Asia Pacific, including an analysis of the current market landscape, the latest activities of the major operators, asset management and investment trends, and ESG considerations.

Key trends:

• Operators keep daily rates high as a result of limited supply, elevated demand and rising labour costs.
• Major global operators continue to expand rapidly across Asia Pacific, with an increased emphasis on lifestyle brands.
• Investment remains robust despite debt-related headwinds, and investors maintain preference for upscale+ assets with rebranding opportunities.
• Adoption of sustainability and ESG initiatives continues; hotels with strong ESG initiatives are set to outperform.

The Inclusive Cities Barometer evaluates the inclusiveness of 44 EMEA cities and 35 APAC cities, based on just under 9,000 data points, 110 metrics across 4 dimensions and 12 subdimensions.

The cities represented in the Barometer are at varying stages of their journey towards more inclusive and vibrant urban environments. Instead of ranking cities by performance, our Barometer measures their progress relative to these starting points, highlighting exemplary successes and providing actionable roadmap for improvement.

Through the Inclusive Cities Barometer, we aim to guide and inspire real estate industry stakeholders towards creating more inclusive and socially sustainable urban environments. Access the hub to find out:

• What is urban inclusion and how we can quantify it
• How your city is performing
• The pathways to inclusive cities
• The role of real estate in driving social value in the built environment
• How to drive social value across the real estate lifecycle

CBRE’s latest leasing market sentiment index reveals that leasing sentiment in most major Asia Pacific markets cooled but stayed in positive territory:

• The lower level of tenant enquiries and site visits was mainly contributed by the mainland China office sector. Other markets, particularly India and Japan, continue to record robust enquiries from the retail sector.
• While expansionary retail demand is supporting market activity, office space demand has softened since the previous survey. Demand for flexible office space weakened, especially in Australia and Southeast Asian markets.
• Following the trend witnessed in the previous quarter, half of respondents anticipate rents and incentives to remain unchanged. Respondents in Japan held the most positive views regarding the office and retail rental outlook, while those in Greater China expected further declines in office rents.
• Mainland China and Hong Kong SAR remain laggards in leasing sentiment, with around 40% of respondents in the former currently engaged in “stay vs go” analysis or renewal exercises, indicating low intentions to expand.

With the Asia Pacific commercial real estate market sitting at the top of the interest rate hike cycle, attention continues to focus upon the sizable volume of outstanding senior loans due to mature; a situation which could lead to a substantial funding gap in the coming years.

CBRE estimates that there is US$257 billion of outstanding senior commercial real estate debt in Asia Pacific, leading to a projected funding gap of US$8.4 billion between 2024-2026.

CBRE expects a funding gap to arise in markets where there is still some degree of capital value decline expected over the next three years. By total volume, Australia will have the biggest funding gap (US$4.6 bln) between 2024-26, followed by mainland China (US$2.9 bln).

The gap will be highly concentrated in the office sector, with CBRE expecting some further repricing over the remainder of 2024.

This report explores the commercial real estate debt market in Asia Pacific and the factors underpinning the debt funding gap in the region, including the markets and sectors that are likely to face the biggest gap, and implications for investors.

This report was originally published in https://www.cbre.com/insights/reports/the-debt-funding-gap-for-asia-pacific-real-estate/

The Real Estate Sentiment Index is developed jointly by Knight Frank India and the National Real Estate Development Council (NAREDCO). The objective is to capture the perceptions and expectations of industry players to gauge the sentiment of the real estate market.

The Sentiment Index Q1 2024 highlights a decadal high, indicating heightened market confidence in real estate’s supply side, fueled by India’s strong economic landscape.

CBRE’s Asia Pacific view on the Global Tech Talent Guidebook explores:

• The appeal of Asia Pacific for hiring tech talent;
• Key considerations for companies seeking to identify markets in Asia Pacific for tech talent; and
• Approaches to talent attraction and location that companies are adopting in Asia Pacific and how this is shaping their real estate strategies.

This report was originally published in https://www.cbre.com/insights/viewpoints/global-tech-talent-guidebook-2024-asia-pacific-view