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Emerging Trends in Real Estate® Asia Pacific 2021

The COVID-19 pandemic has accelerated change in the real estate industry. Throughout 2020, the success of government efforts across the Asia Pacific to contain the spread of COVID-19 has helped limit its impact on local real estate markets. At the same time, however, there is a sense that asset values have been propped up by a combination of transient factors — government support programmes, bank forbearance policies, healthy corporate balance sheets — that are unlikely to last. As the tank runs dry, there is growing conviction among investors that a market correction is inevitable.

A joint undertaking between PwC and the Urban Land Institute, this 15th edition of Emerging Trends Asia Pacific aims to shed light on real estate investment and development trends, and other issues throughout the APAC region.

Key findings

Notable market trends and sentiments

  • In terms of capital flows, 2020 has seen a steep decline in year-on-year transaction volumes. This partly reflects the impact of border closures preventing buyers from travelling, and partly the fact that sellers are refusing to discount asset prices in the hope that markets will quickly rebound once a vaccine is delivered.
  • Cross-border capital flows are also down, although significant activity has been registered in South Korea and Japan, as investors adopt a flight-to-safety mentality and seek out markets with deep domestic demand that are less affected by geopolitical risk.
  • China also enjoyed significant cross-border investment for much the same reason, proving that foreign capital still sees it as an important destination despite ongoing trade tensions.
  • This year’s investment prospect rankings showed an ongoing preference for regional gateway cities that offer liquid, stable markets, together with reliable sources of domestic demand.
  • Singapore remains the top investor preference, as in last year’s report, with Tokyo and Sydney featuring second and third respectively in the rankings.

Effect of COVID-19 pandemic on individual real estate asset classes


With future demand for prime office space now thrown into question by a number of competing influences — social distancing requirements, the work-from-home trend, economic retrenchment, and the need for tenants to cut costs — investors have become somewhat gun-shy. The balance of opinion among interviewees across the Asia Pacific was that although employees will work from home more so than in the past (perhaps one day per week), it is unlikely to become a trend to the same extent as is expected in Western markets.


Already a favourite asset class pre-COVID, logistics sector prospects were boosted by the pandemic as online spending soared and manufacturers began creating stockpiles of components they had previously procured on a “just-in-time” basis. Cold-storage facilities are now also seeing strong growth, again due to increasing demand caused by rising ecommerce sales.


The pandemic-induced surge in ecommerce shopping has once again served to accelerate a preexisting trend. But while the long-term implications for brick-and-mortar retail are undoubtedly negative, there are still positives.


As an asset class, residential is favoured by investors during recessionary cycles because — in the Asia Pacific especially — there is usually strong demand, as well as a good track record of mortgage and rent payments.


Like retail, the hospitality sector has been hard hit by the pandemic, in this case by lack of tourists. While there may be some hope in reinventing hotels to focus on domestic tourism, it seems likely the sector is now oversupplied, leading to many assets being sold off and converted to other purposes, such as for-rent residential.

Investors are anticipating asset prices to fall as we move into 2021. Three markets were identified as offering potential sources of stress

  • China - where a government-led liquidity squeeze is depriving smaller developers of bank financing.
  • India - where the implosion of local non-bank finance companies again presents opportunities for private equity funds.
  • Australia - where the economic impact has been more acute than in other regional economies, and where greater market transparency is likely to offer more buying prospects in the short term.

As recession bites, other opportunities are emerging

  • Asian companies that have long held significant amounts of corporate assets in the form of real estate are now looking to tap those holdings to obtain working capital. By divesting them in the form of sale-and-leaseback transactions, the assets can still be used as needed (often as corporate headquarters) while allowing companies to transition to asset-light business models that offer more efficient uses of corporate capital.
  • Rotating capital away from mainstream asset classes that now face cyclical or secular headwinds (such as office, retail, and hotels) and into those that provide reliable income streams in a down-trending market (such as logistics, multifamily residential, and data centres).
  • A growing awareness of health and environmental issues, as well as an increasing understanding that building efficiency, in particular, is an issue that can translate directly to corporate bottom lines.
  • New-building designs are becoming more flexible, with developers seeking to create general purpose structures that can be adapted to new types of uses, allowing a variety of purposes over their lifetimes.

“2020 is a challenging year for all investments including real estate. Due to COVID-19 travel restrictions, there is a significant decline in cross-border investments. But with current liquidity, Singapore's stable market with good quality assets has helped the country maintain its position as the city of choice for investment prospects. With the economic uncertainties leading into 2021, investors will remain cautious. In Asia Pacific, I believe selected asset classes will generally fare better compared to the rest of the world. So investors should be opportunistic when evaluating the risk-return profile.”

Yeow Chee Keong, Real Estate & Hospitality Leader, PwC Singapore

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Yeow Chee Keong

Yeow Chee Keong

Real Estate and Hospitality Leader

Tel: +65 9018 1798

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