This inaugural issue explores a variety of trends and hot topics in the Asia industrial and logistics market, with CBRE experts providing market leading insights to ensure our clients are at the forefront of the sector.
This new report series aims to capture the key trends and forces that are accelerating the pace of change in the commercial real estate sector; change which is transforming the way in which we value property and is reshaping the value proposition of different asset classes.
Investors are displaying a growing interest in data centres as a new asset class for real estate investment. With yields falling for almost all real estate asset types in Japan, relatively high yields are one of it’s attractions.
The number of new data centres in Japan has been stagnating and there is a growing sense that there is a shortage of data centres. In addition, recent surveys indicate that real demand for data centres will continue to expand.
Property markets are cyclical in nature and the hotel market is no different. Picking the right time to enter – and indeed exit – the market is key to maximising return. With differing performance across Australia’s main hotel markets investors have several options to choose from when deciding where to invest but in recent times have shied away from markets such as Brisbane and Perth. However, with the leisure markets looking like they have peaked, Sydney and Melbourne being tightly held, is it the right time for investors to switch their focus?
The development of green buildings in China has undergone major advancements in 2017. Early in the year, the Architectural Society of China (ASC) published the “Assessment Standard for Healthy Building”, a guideline with strong emphasis on the concepts of “green and health”, “architecture and people”; In March, the Ministry of Housing and Urban-Rural Development (MOHURD) had released “China’s 13th Five-Year Plan of Green Building Development”.
"On the 23rd of September 2017, New Zealand voters went to the polls. The final formation of the Government was announced four weeks later with NZ First deciding to form a coalition with the Labour party, which also has a supply and confidence agreement with the Green Party. CBRE has reviewed the coalition agreement, the supply and confidence agreement, the now announced 100-day plan, as well as the party manifestos, to analyse their implications for commercial property."
Global Gateway Cities reports on office and retail investment trends in 24 global gateway cities, giving investors a comprehensive overview of pricing and market conditions. Using a mix of proprietary and key external data, CBRE Research provides an analysis of investment activity as well as economic, occupier, supply, rent and yield trends in the third edition of this report series.
Tourist arrivals to Thailand have continued to set new records in 2017, with 26.1 million arrivals up to the end of September, an increase of 5.2% y-o-y. Around 28% of tourist arrivals this year have come from China, with Q3 2017 arrivals up 11% y-o-y. The increase in the number of Chinese tourists has greatly benefitted retailers in Bangkok and Thailand’s major resort destinations. This ViewPoint by CBRE Thailand Research explains Thailand’s popularity as a shopping destination for Chinese tourists; analyses Chinese tourists’ spending patterns and its impact on retailers; and identifies the strategies adopted by retail landlords seeking to capitalise on the rapid growth in Chinese arrivals.
Industry Profile of Each Origin by Leased Space: Foreign occupiers mainly from traditional industries; Financial companies drive domestic demand; Local occupiers superior on emerging industries and real estate.
Industry Profile of Each Origin by Leased Space: Foreign occupiers mainly from manufacturing and TMT; Traditional financial companies drive domestic demand; Local occupiers superior on non-traditional finance and services.
Industry Profile of Each Origin by Leased Space: Foreign occupiers mainly from traditional industries; Financial companies drive domestic demand; Local occupiers superior on emerging industries and real estate.
The regional retail market showed some signs of recovery in Q3 2017, with Hong Kong, China and Singapore all recording a rebound in retail sales. However, overall leasing activity remained weak. Upbeat markets were led by Japan, with Tokyo and regional cities recording robust leasing activity from a broad range of sectors. In Australia, major cities continued to enjoy solid leasing demand as competition intensified across a number of categories.
The model for delivering residential assets in Australia is changing. Investor and consumer objectives have combined to make market conditions more supportive of multifamily residential in Australia. Four propositions are at the heart of the sector’s emergence: a new product paradigm; investor return requirements; customer value proposition; policy initiatives. We expect these propositions to be increasingly accepted as mindsets change for investors, financiers, developers and governments and, as a result, there will be more investors seeking opportunity in multifamily investment.
WORK_IT: How Tech Will Redefine Real Estate - And Why You Must Prepare Now
APAC Major Report | November 2017
As technology exerts a greater influence on all aspects of our lives, CBRE's WORK_IT: Technology | Workplace | Jobs series examines the various dimensions and impacts of technological change in the workplace. The digital age is changing the face of business. While this has brought a myriad of advantages, it has also created significant challenges. Harnessed in the right way, technology can be an enormous asset. Yet many companies are struggling to comprehend and get to grips with the rapid pace at which technology is evolving.
A candid overview of property technology and how it may eventually disrupt or enable the real estate industry. While technology offers boundless opportunities, there are still gaps in which technology cannot encroach.
As competition for human resources continues to intensify, the format and appeal of workplaces will exert a significant impact on corporate growth. Workplaces which prioritize the needs of the worker, as exemplified by ABW, is likely to become a new standard for corporate offices in Japan.
Technology is transforming the way people work and corporates operate. It is also making it more feasible for companies to operate offices outside of city cores. Decentralisation is a popular occupier strategy in Hong Kong given high rents and tight space availability in the CBD. Ageing building stock in many core office submarkets is also weighing on corporates’ leasing decisions.
Welcome to the second edition of Check-IN, a paper focussed not on the detailed numbers but interpreting and commenting on some of the longer term trends. This edition looks at a number of subjects, in particular why 2017 has been slow in terms of transaction volumes. We also look at some of the changes in demand and the resultant growth of lifestyle brands and their potential impact on the market.
When respondents (retailers) were asked about their existing international presence and appetite for future expansion, the most frequent response was, “Have already opened stores overseas and are planning to expand further,” chosen by 41.4% of retailers. This was more than double than those who selected the reverse option, “No plan to open stores overseas but planning to expand stores domestically,” chosen by 17.1% of respondents. All in all, more than half of the respondents gave a positive response when asked whether they were planning to expand overseas or grow their international presence.
The Philippines is firmly established as a preferred destination for Business Process Outsourcing (BPO) from English-speaking industrialised countries including the U.S, UK, Australia and New Zealand. The country’s low cost of labour, university educated and English speaking workforce, strong Information Technology Communications (ICT) infrastructure and generous tax benefits and long-standing cultural ties with the U.S. make it an ideal location for multinational companies seeking to outsource low-end business functions such as call centres, customer service, transaction processing and data entry. While fundamentals are solid, growth remains strong and the overall outlook is positive, the Philippines’ BPO industry faces a number of significant challenges. These include the introduction of disruptive technology, the impact of U.S. protectionism, competition from other markets and possible changes to tax laws.
Industrial rents in Sydney have been consistently higher than in Melbourne. In 2012, Sydney super prime net effective rents (NER) attracted a 40% premium compared to Melbourne; today it is closer to 90% (figure 1). Strong growth of industrial supply over the past five years in Melbourne outstripped demand, having a moderating impact on rents and causing incentives to grow from 7.5% in 2012 to 25% in 2017. At the same time, Sydney saw constrained supply, particularly in inner city areas as well as withdrawals of industrial stock for residential conversion. This has placed upward pressure on rents.
The guide is developed from empirical data to assist companies with capital planning using an index for each of the key areas of capital, leasing and operating costs as well as a combined or holistic cost in present value. This Net Present Lifecycle Cost can assist to estimate and benchmark the full cost of a commercial office investment over a five year period across Asia Pacific. In line with the growing number of Grade A office buildings in development outside of CBD’s, CBRE has applied the NPLCC to quantify the holistic cost difference between CBD and city fringe locations. In addition, CBRE Project Management has included high level project timeline estimates for each of the 25 cities across various project sizes to further help with corporate real estate planning and business case proposals.
CBRE Advisory & Transaction Services Research Review
APAC Major Report | September 2017
This edition includes articles on occupier trends in the legal sector; retailer strategy and expansion in Asia Pacific; the rise of co-working in Singapore; and the transformation of logistics facilities in Japan.
Connecting ASEAN: Infrastructure, Integration & Real Estate Growth
Singapore Major Report | August 2017
ASEAN has been expanding, but shortfalls in infrastructure investment limit its growth: According to the Asian Development Bank, US$92 billion more in infrastructure investment is needed for the region to maintain its growth momentum and eliminate poverty.
This edition includes a summary of the key findings of the CBRE Asia Pacific Occupier Survey, now in its second year. The survey explains the nuances between multinational and Asia Pacific corporations with regard to their corporate real estate strategies, and analyses the two groups’ areas of focus and priorities for the next three years.
This report examines the growth strategies adopted by co-working space operators in Asia Pacific over the past year; pinpoints the factors driving multinationals’ use of co-working space; and explains how co-working centres are playing a key role in facilitating interaction between large corporations and start-ups, placing them at the forefront of the evolution of a new business eco-system.
The relocation of the capital city from Jakarta has been mooted for several decades and, if implemented, will have a far reaching impact on the real estate sector, both in Jakarta and in the location of the new capital. This ViewPoint by CBRE Research discusses the factors influencing the decision to move the capital; identifies potential locations under consideration; and explains the opportunities that the relocation will create for real estate occupiers and investors.
As yield spread replaces capital appreciation as the main driver shaping investor motivation in Asia Pacific, investors are utilising a variety of new channels when entering preferred investment destinations.
Annual en bloc commercial property transaction volume in China is set to surge by 45% to RMB 260 billion by 2020, according to a new forecast by CBRE Research, as the country transitions from a primary market dominated by investment for development, to a secondary market characterised by investment in income producing assets.
Global retailers retain a strong appetite for expansion in Asia Pacific and continue to enter new markets across the region. However, structural changes such as the rapid growth of e-commerce and the emergence of home-grown retailers continue to pose significant challenges to growth.
The influence of the Millennial generation can be felt across a multitude of industries, particularly those that engage with real estate. Yet, the sector of the population between ages 20-29 is often misrepresented and misunderstood.
The advent of co-working spaces is termed as the next wave of disruption in the office segment. CBRE Research analyzed the presence of the segment in India along with evaluating the impact on developers and occupiers, going forward.
July 1, 2017 marks the 20th anniversary of the handover of Hong Kong to mainland China and the establishment of the Hong Kong Special Administrative Region (HKSAR). This infographic by CBRE Research examines the evolution of the Hong Kong economy along with its commercial and residential real estate markets from 1997-2017.
After survey in 2015, this year we conducted a new tenant survey, expanding our coverage from 85 to 115 Shanghai Grade A office buildings in CBRE’s database and our analysis is based on nearly 4,000 pieces of tenant information, 20% higher than previous report. We believe this report will help our clients to have more insights into China’s most dynamic office market.
Placemaking – defined by CBRE Research Asia Pacific as “integrating design, amenity and community to create a unique space where people want to be” has until recently been confined to retail landlords responding to the challenges posed by e-commerce by creating compelling reasons to attract shoppers to spend time in their malls.
Welcome to the H1 2017 CBRE Research Review in the Pacific. This semi-annual publication connects you with an executive summary of research from CBRE’s Australia, New Zealand and Global research including website links to full reports.
The Perth CBD office market has seen some extreme conditions over the past decade, from the unprecedented highs during the peak of Western Australia’s mining boom to the subsequent slump as the sharp fall in commodity prices coincided with the end of the construction and investment phase in the mining sector in the north of the state. These events have led to significant movements and corrections in both demand and rental rates for office space. Perth now appears to have moved beyond the worst of the downturn, and the price-corrected rents have increased the affordability of inner-city office accommodation. As a result, we are seeing a number of tenants move into the CBD from fringe and suburban markets, as well as existing CBD tenants upgrading to a higher grade asset in a flight-to-quality.
Melbourne’s CBD retail landscape has transformed in recent years. Driven by changing consumer habits, the influx of prominent international brands and the rise in population and tourism, the way space is used is shifting. An emerging trend in Melbourne’s CBD is the concept of multi-storey retailing, or vertical retailing. This is seen around the world, especially in locations experiencing high rental rates, limited space and growing population density.
Within the Sydney CBD, an increasing amount of retail supply continues to be taken up by food and beverage (F&B) operators looking to capitalise on Australia’s growing food culture. Rising in line with busier lifestyles and a greater awareness of health, consumer preferences are changing, with cafes and coffee shops focusing on healthier, premium quality food and beverages taking market share from more formal dining options. As such, landlords are showing a growing preference to upgrade and expand F&B offerings, using innovative food concepts to attract foot traffic and take advantage of the higher rents on offer, making it one of the highest and best uses of available space.
An agreement between the Australian and Chinese governments has declared 2017 to be the “China-Australia Year of Tourism” (CAYOT) with the goal being to strengthen ties between the two nations and increase tourism. A key determining factor in the success of this partnership will be the buy-in of Chinese airlines as the establishment of more routes will be paramount to its success. There are numerous examples across Australia showing that when new routes are established tourism increases. This growth subsequently has a positive impact on hotels, illustrating the importance of airline routes. However, will our airports be able to cope or will they be capacity constrained?
According to results from the CBRE Asia Pacific Investor Intentions Survey 2017, the ASEAN region is expected to continue drawing investors in 2017. Investment sentiments have been growing on the back of improving infrastructure investments and rising urbanisation.
In Singapore, where nearly 90% of the population own a home, housing affordability has always been a major concern. Due to escalating land costs as well as loan curbs, developers have in recent years adopted the strategy of downsizing the units to keep them within the affordability threshold of most homebuyers. However, there is a limit to how much smaller the units can get while still remaining decently liveable space – even as decreasing home sizes are still acceptable as household sizes shrink.
Activity-based working has been a buzzword of the office sector, gaining significant traction in recent times. The benefits of implementing activity-based working does not revolve only around costs. Facilitating intangibles such as driving greater employee engagement, greater work ownership and fostering creativity and collaboration among workers will eventually lead to positive tangible outcomes in the form of higher business performance.
Infrastructure drives value in real estate through generating business and consumer efficiencies. An understanding of the state of play of infrastructure in cities is therefore critical to understand the direction and shape of future developments and related opportunity. While the national spend on public infrastructure is currently very concentrated in NSW, there is a healthy pipeline of infrastructure projects in Victoria; close to $40b in total, necessitated by Victoria’s current strong population growth (of over 2%, the highest across Australian states) and expectations that strong growth will continue, and on the current trajectory drive Melbourne to be the largest city in Australia by 2031.
CBRE’s 2017 Asia Pacific Real Estate Market Outlook – India Report highlights the policy initiatives, reforms and key market trends that will drive the future of the country’s real estate sector in 2017. The year 2017 is expected to be a year when the results of all policy initiatives taken in 2016 are likely to take shape. Most of the steps, including Real Estate Regulatory Act (RERA), Goods and Services Tax (GST) and Real Estate Investment Trusts (REITs) are aimed at improving transparency and enhancing the overall investor sentiment.
Recent years have seen growing discussion around St Kilda Road’s future as an office precinct. Driving the conversation, particularly over the last two years, has been the steady withdrawal of office accommodation by developers for repurpose to residential. More recently, a significant rise in vacancy has raised questions around changing tenant demands in the precinct. On its own, however, the total vacancy rate masks two diverging stories between prime and secondary grade office.
Sustainability has become an important part of building design with Green Star, NABERS and WELL ratings commonplace in the commercial property sector. Historically, there has been less importance placed on sustainable design elements in the industrial sector. This is due to a number of factors including cost, market pressure and the unique development requirements of industrial buildings. However, increasingly more firms are seeing value in developing and retrofitting industrial buildings with a focus on environmentally sensitive design, improving operating costs, functionality and attracting tenants.
Theme park has always been a magnet for urban tourism consumption. The wave of upgrade of China's domestic consumption has once again brought it into the focal point of the market. The fast-growing China market, along with its volume for growth, is attracting world-class operators of theme parks to the country.
The year 2016 was a year of landmark reforms for India's real estate sector; ranging from the formation of a strong regulator to the easing of foreign investor norms. The year also witnessed a major thrust on affordable housing and a strong revision to the Real Estate Investment Trust (REIT) guidelines. The passage of the Real Estate Regulation Act (RERA) in early 2016 and an expected implementation of the Goods and Services Tax (GST) by mid-2017 are other landmark reforms that will shape the future of India's real estate footprint. This report aims at addressing the impact of these reforms on India's RE sector.
Total transactions (by value) in the Pacific region in 2016 were down from the record breaking 2015. Investors from the Pacific in 2016 acquired 12% less abroad (compared to 2015) and investors from outside the region bought 30% less Pacific assets.
The Goods and Services Tax (GST) is likely to be legislated in 2017, close to one and a half decades after it was first mooted. The recent passage of the Constitutional Amendment Bill, as well as the release of the model GST laws, indicates the government’s determination to implement an efficient tax system. To better understand the impact of the GST on the warehousing sector in India, CBRE Research conducted a survey of leading warehousing space occupiers to gauge their views on the new taxation regime; understand their strategies in the post GST era; and ascertain the impact of the GST on their overall business and operating costs.
For occupiers considering an office move, the three most cited items to consider were a more convenient commute and location; cost (rent, utilities, etc.) and a building's level of earthquake resistance.
Following the 2016 earthquake, Wellington has been operating in a turbulent environment due to the scale of the damage throughout the city. Many buildings remain closed, and many of these buildings have futures which are unknown, not only to the public, but also to the owners, landlords and tenants. Regardless of the uncertain future, we know that there has been a large reduction in vacant space within the city due to building closures and tenant displacement. The vacancy reduction was almost 70,000sqm throughout the Core CBD, Thorndon, and Te Aro.
This special report on Kochi, located in Kerala encapsulates the real estate market dynamics of the city. The growing prominence of the IT sector in Kochi, coupled with various Government infrastructure initiatives and availability of quality space is making Kochi an attractive destination for corporates looking to expand in southern India.
The pharmaceuticals and life sciences industry is undergoing a rapid transformation against a backdrop of increased competition from generic rivals, funding challenges for small market targeted smart drugs and the decline of rainmaker blockbuster drugs.
Nowhere is the impact of the technological revolution being felt more than in the way companies conduct business and the way we work. However, the world is only at the cusp of the real impact of the digital age. Further and significant change is forecasted to occur in the coming years across a number of key areas, including automation and jobs; technology and talent; the emergence of millennials, and the transformation of the workplace.
Jakarta's outdated transportation infrastructure and constant gridlock have long been a source of discontent. The situation has worsened in recent years amid a boom in car ownership fueled by a rapidly expanding middle class. The economic costs in terms of time, health and fuel are enormous and are a major hindrance to doing business in a city that is home to more than 10 million people.
Advisory & Transaction Services Research Review H2 2016
APAC Major Report | March 2017
This edition includes articles on the CBRE 2017 Asia Pacific Real Estate Market Outlook; the rise of co-working space in Asia Pacific; regional industrial trends; the evolution of the Hong Kong Grade A office market; and Western Australia’s retail centre revolution.
Finance and TMT (Technology, Media and Telecom) account for 32% and 15%, respectively, of the total Grade A office stock and are increasingly driving up demand, while non-traditional finance and small-sized TMT firms face volatilities. Demand from Business Services companies remain stable. Manufacturing and energy enterprises are decentralizing or downsizing their office sites and will continue to give place to service sector.
From an investment perspective, cap rate for data centers is estimated to be 5.5% to 7.5%. It will likely attract investors seeking higher yield under the current environment where expected NOI yields have declined to record lows below 5% for traditional asset types.
The more stable macroeconomic indicators recorded in H2 2016 have provided room for policymakers to finetune the loose credit conditions and introduce proactive fiscal growth. Supported by government-led campaigns to promote mass entrepreneurship and innovation, strategically important emerging sectors including information technology, bio-industry, new energy vehicles and digital and creative industry will continue to gain momentum in 2017.
Stronger leasing, improved utilisation - Underlying economic growth will provide solid support to the occupier market in 2017. In combination with improved space utilisation, this should ensure robust levels of occupier activity and demand. We expect 2017 to be one of the most buoyant years for leasing activity in this cycle.
2017 is shaping up like more of the same on the economic front in Australia with growth of around 2.5%reflecting a steady contribution from consumption but an emerging drag on growth from residential construction and flat business investment.
Strong support for capital values - The low cost of financing and strong end-user demand will provide strong support for capital values, despite the likelihood of interest rates rising from historically low levels.
On the back of improved economic fundamentals, Vietnam’s gold, oil and stock prices picked up and its real estate market remained buoyant in spite of instability in international economies. While the upward trend was not seen in GDP growth rate, Vietnam ended 2016 with generally good news and is anticipating a positive outlook for 2017.
While Singapore’s GDP growth for the last quarter of 2016 surpassed expectations, it was still a subdued year by the republic’s standards. Advance estimates for GDP growth was 1.8%, its weakest performance since 2009. With current domestic maladies still persisting alongside global uncertainties and rising interest rates, slow and steady growth could be the new normal.
Stronger focus on office optimisation - Domestic occupiers are expected to stay cost conscious and demonstrate a preference for cost effective options. Workplace strategy will remain a priority for multinationals.
CBRE’s 2017 Asia Pacific Real Estate Market Outlook - Opportunities in the New Normal – identifies and explains the key themes set to shape the regional property market over the coming year. Investors with a stronger appetite for risk are expected to seek opportunities outside gateway cities in locations offering attractive pricing.
Both office and logistics sectors will see an increase in new supply from 2018; some markets will gradually become occupier markets. Occupiers will have a wider selection of prime assets, and investors may have more investment opportunities.