With the region still grappling from the effects of the US-China trade tensions as well as continued unrest in Hong Kong, the spread of a novel coronavirus added to the uncertainty on the region as the Year of the Rat began. However, as Yeow Chee Keong, Real Estate and Hospitality Leader, PwC, Singapore, noted, there remains ample liquidity that is waiting to be deployed in the region. “Despite impressions that we are at the top of the investment cycle, investor interest continues to be strong”, he pointed out. Jyoti Ramchandani, Managing Director, Fund Manager of SC Capital Partners, observed that throughout 2019, governments have reverted to a more accommodative monetary stance to counter the effects of the trade war amid global uncertainty and the specter of slowing growth. This “low for longer” theme will continue to support investment fundamentals in real estate. She maintains that spreads, traditionally attractive, will continue to remain attractive in the region. “The subdued inflationary environment that has allowed central governments to reduce their interest rates in 2019, and we expect that rates are likely to will continue to remain low this year,” she added.

As Callum Young, Executive Director at Savills, who moderated the panel discussion noted, late cycle investing does present its own set of challenges. Still, despite such dynamics coming into play, the panel remains cognizant that there remains ample capital waiting to be deployed. To play into the wider demographic and urbanization themes in the region, alternative sectors will continue to gain traction among investors. A key theme in late cycle plays that emerged in the discussion is the emergence of second CBDs in the gateway cities will provide good investment opportunities, focusing on growth corridors that will benefit from the current decentralization trend taking place in the region, particularly in Australia. “Paramatta is a great example of that”, said Niel Thassim, Managing Director and Asia Pacific Head – Private Funds of Brookfield Asset Management, who pointed out that the area will become the geographical center of Sydney as it is going to capture about 25% of the entire country’s population growth. With competition for investment grade assets likely to intensify, debt is also gaining traction as one of the ways to secure exposure to real estate, particularly in China where the policy of deleveraging has crimped access to traditional methods of financing.

“It is very hard to know how geopolitical risk will play out so as a real estate investor you just have to be comfortable investing in an environment of uncertainty,” said Niel. However, he is focused on three key risks for now, which are the US-China trade spat, the unrest in Hong Kong and the impact of geopolitical tensions on oil prices, particularly due to the dynamics in the Middle East. Still, he remains sanguine as he believes the biggest impact of the US-China trade spat are first and foremost in global equity markets and its effects on real estate would only be felt if it turns protracted and translates into impacts on investment and consumption trends. Han Hwee Chin, Senior Vice-President, Research and Strategic Planning, of GIC Real Estate agrees that as long-term investors, it is important to look through the geopolitical risks and not detract from a country’s long-term demographic and structural trends.

Investments into logistics facilities will remain sustained as the regional demographic trends continue to favor the sector. As Hwee Chin noted, there remains a structural undersupply of Grade A logistics space in the region. “In our view, good quality logistics space with room for automation and well located near to population centers would likely to outperform”, she said. Besides last mile facilities, Chee Keong also noted that cold storage facilities will continue to grow in popularity as rising incomes will drive demand for fresh produce. Echoing this theme, Niel further believes that demand for refrigerated facilities in China can only go up as the China’s population moves up the wealth scale.

In his presentation on the region’s occupier trends, Manish Kashyap, Regional Managing Director, Advisory & Transaction Services, APAC, CBRE, Singapore identified three major themes that are shaping office occupying trends in the region: agility, alternatives, assessment. “From an office occupier perspective, we are now witnessing an unprecedented shift in how we use real estate,” said Manish. He pointed out that occupiers are now exploring alternatives in the market and defying established locational strategies. In the past, you would probably not think a tech company would move into the CBD, he pointed out. “There is real churn in how occupiers are thinking about office spaces which is largely motivated by a need for talent”, he said. Occupiers will continue to seek agility in their real estate footprint and this trend will undoubtedly reinforce itself into the new decade. This hotelization of real estate will continually drive investors and landlords to continually assess their assets to engage tenants and maintain relevance in this ongoing shift.