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In this January 2021 issue, we take a look at the latest updates on the local commercial real estate market as well as share an outlook for the sector in 2021.

• While the gradual return to office is expected this year, the office segment may not immediately return to its pre-pandemic vibrancy as the uncertain global business environment may continue to affect expansion decisions of businesses over the short to medium term. The office segment, however, is seen to benefit from the anticipated growth of the IT-BPM sector with the United States’ less protectionist policies under its new administration.
  
• The new COVID-19 variant has caused renewed anxiety and further stalls the resumption of international travel. It is also seen to discourage domestic travel as the country extends the more stringent community quarantine qualification in major urban areas and tourist destinations, thus, further blurring the tourism industry outlook.

Q4 2020 was a crucial quarter as it marked a recovery momentum with leasing indicators trending favourably compared to the previous couple of quarters. In a time of change with COVID upending the workplace playbook, the leasing trends and occupier strategies are undergoing a rapid shift and will have a bearing on market activity. Even as the COVID scenario was evolving and occupiers continued with evaluating their real estate portfolios and charting their space requirements, almost all the cities saw heightened levels of market activity with expansion driven demand making a comeback of sorts as well.  Mumbai, Pune, Delhi NCR, Ahmedabad, and Kolkata have witnessed higher fresh leasing activity for expansion and consolidation during the last quarter of the year. This augurs well for the leasing momentum in 2021, which is likely to get broad-based across cities with introduction of a vaccine and a gradual return to the workplace providing the much-needed push to market activity. 

In this report, we analyse the Indian office markets’ performance in Q4 as well as during the full year of 2020.  

Although office leasing activity was generally more muted in Q4 compared to other quarters in the year, it was broadly similar to Q4/2019 levels.

• Demand for office space largely emanated from tenants looking for replacement space because of the need to move out of older buildings to be redeveloped, as well as tenants with office leases due for renewal.

• Owing to the uncertainties arising from the pandemic, tenants are continuing to adopt a wait-and-see approach and looking for clarity on trends to emerge on future workplace practices before deciding on future office space requirements.

• In Q4, the office market saw relatively significant leasing deals from technology companies. These companies are expected to continue expanding their presence in Singapore, which they deem as an attractive base due to its political stability, strategic position and strong economic fundamentals.

Strata Office Market outlook

•  In 2021, the strata office market together with the larger office sector in Singapore is expected to remain under pressure, with companies critically reviewing the way space is occupied in the post-pandemic era characterised by evolving remote work protocols. Therefore, transaction volumes as well as prices are likely to remain subdued for at least the first six months of the year.
• Nevertheless, as office users rationalise and right-size their space requirements, occupiers such as small enterprises may turn towards owner-occupied strata offices as a viable alternative to tenanted space. As such demand for strata offices, especially those in central locations, could improve in the second half of 2021.

Strata Retail Market outlook

• Moving forward, the global economic outlook remains uncertain with recurring infections in other nations despite the distribution of the vaccines. And even if vaccine distribution proves to be successful, prices of strata retail units in Singapore are envisaged to remain soft with more distressed sales expected due to the lack of tourists and safe distancing measures still in place.
• The demand for such strata spaces is expected to come from proprietors that intend to run their own businesses, preferring to set up shop in locations where strata retail developments tend to be typically located. Often the lower costs when compared to renting retail space in a prime shopping mall in the same location act as the greatest incentive.
• Thus, with the retail market gravitating towards more experiential placemaking strategies and migrating some of their services to digital platforms, there is a growing imperative for strata retail storeowners to also adopt similar ways to survive in a market that is in constant change.

2020 was a challenging year for Philippine real estate and the global property market, but we see the new year as a promising time for sectors such as industrial & logistics, office, residential, REITs, and data centers, among others. The industrial & logistics sector was the most stable asset class in the past year, and there are huge opportunities in the e-commerce and the rollout of COVID-19 vaccines. The office sector is likely to perform better than 2020, while we anticipate residential real estate to exhibit a slow but gradual rebound.

In 2021, macrotrends such as the boom of e-commerce, flexible office setups, and continued decentralization outside Metro Manila
are likely to continue and contribute to the property market’s soft recovery.

The Philippine population, which has grown at 1.5% on average each year since 2015, is key to recovery. This growth has created a “demographic sweet spot” and continues to drive consumption and, in particular, the expansion of online retail and the related logistics platforms. The young Philippine population will also continue to keep the country at the forefront of the global BPO industry as outsourcing continues to increase.