As real estate investors plan their 2022 post-pandemic strategies, the road ahead is fraught with uncertainty. After nearly two years of lockdowns and travel embargoes, regional transactions are rebounding amid the reshaped contours of the investment landscape caused by the profound changes in the ways we use real estate today in the post-pandemic world. This 16th edition of Emerging Trends in Real Estate, a joint undertaking between PwC and the Urban Land Institute, aims to shed light on real estate investment and development trends, and other issues within Asia Pacific.
Office has been the go-to asset class for many years, but its popularity has suffered lately as investors question its staying power in the age of corporate work-from-home policies. At the same time, many investors are convinced that the impact will be limited in Asia and so are now taking contrarian bets, focusing on well-located, good-quality assets.
The surging popularity of logistics as an asset class is due to a combination of factors: structural undersupply of high-quality assets, the evolution of more sophisticated supply chains, and the rapid growth in e-commerce retailing, catalysed recently by pandemic lockdowns. Transaction volumes have boomed this year, but investor appetite is undiminished despite ongoing yield compression.
The explosive growth of e-commerce retailing in the wake of widespread lockdowns has created a pervasive sense of negativity towards conventional retail assets, exacerbating a decline that had started even before COVID-19 arrived. At the right price, however, any asset becomes attractive. The sector seems to have hit that point around the middle of 2021, as third quarter retail transaction volumes spiked.
Weak economic fundamentals, combined with rising inflation, make the residential sector appealing to institutional capital. Many funds are now looking to participate in the Asia Pacific region’s growing multifamily sector, especially in the leading markets of Japan, Australia, and China.
Hard hit by pandemic travel embargoes, the hotel sector has become a target for investors seeking distress deals. They have been mostly disappointed in 2021, however, as banks hold back on foreclosures and owners hold on in the hope of better times ahead as domestic travel picks up and safe travel corridors open.
"Despite a challenging 2020, Singapore remained resilient with rebound in transactions in 2021 and strong prices in the office space. The city-state – ranked second best city in Asia Pacific for investment prospects next year – continues to remain attractive with expectations of supply shortages, growth in office rentals, and possible relocations of Asia Pacific HQs to Singapore. The city-state is also the biggest single source of outward investment with US$9.3billion into Asia Pacific during the first nine months of 2021."
Yeow Chee Keong
Real Estate and Hospitality Leader
Tel: +65 9018 1798