The pandemic accelerated industry trends and revealed an exciting ‘opportunity in obsolescence’ in Asia’s commercial property sector
As we enter the second year since the coronavirus pandemic wreaked havoc in the world, we are now starting to see some positive light. Outlook for commercial property in Asia is improving as industries stabilise and growth areas prop up demand for office spaces.
Traditional sectors like finance and service were hit hard by the coronavirus pandemic, but this may not be fully attributed to the virus. Talking to Bloomberg Markets Asia, JLL APAC CEO Anthony Couse said that the pandemic only accelerated trends that were already influencing the market.
We were seeing trends pre-COVID, but COVID came along and actually was an accelerator or catalyst of significant change. And some of that change has been in the health and safety in the workplace. That’s where that obsolescence term comes in.
Anthony Couse, JLL APAC CEO, explaining the “opportunity on obsolescence in Asia’s commercial property market
“Some of the traditional sectors —the finance sector, the service sector —are still in decline. And that decline is not necessarily about work from home. I think it’s more indicative of what’s happening in the industry in terms of retrenchment or headcount,” he said.
Another change accelerated by the pandemic is an upgrade in workplaces, specifically in terms of health and safety. JLL APAC referred to this trend as “opportunity in obsolescence.”
“We were seeing trends pre-COVID, but COVID came along and actually was an accelerator or catalyst of significant change. And some of that change has been in the health and safety in the workplace. That’s where that obsolescence term comes in,” he explained.
“We looked at portfolios in the region and about 40% of office space in the region needs to be upgraded. To an investor that represents about 400 billion dollars of capital upside which of course is where investors are looking for that capital upside. That’s the kind of exciting opportunity that people are looking for.”
Another opportunity in obsolescence is within the realm of retail and e-commerce. Although retails sales in Asia Pacific go as high as 20% compared to the global benchmark of 14%, infrastructure is not yet mature. Emerging markets like China, India, and SEA are working to upgrade and automate the supply chain through robotics and solve last-mile delivery.
Their other predictions include:
- Green shoots are seen in China, S. Korea, and Japan
- Investors and occupiers will focus on the highest and best use for scarce space
- Offices of the future will likely have more collaboration space
- Declines in leasing volumes to improve throughout 2021
As some industries experienced a downtrend during the pandemic, others were in a growth trajectory. These growing industries managed to prop up demand for commercial spaces in Asia Pacific. These growth areas include the tech sector, logistics, e-commerce, insurance, gaming, and health.
JLL APAC, one of the largest commercial property brokerages operating in over 80 countries, continue to find new and emerging areas for investment. Although retail took a massive hit from the pandemic, there is an opportunity to repurpose assets on the back of a boom in e-commerce.
Office space upgrades and growth areas aside, JLL also plans to tap into promising new asset classes in search of better yields. Logistics continue to be the most sought-after asset class as well as data centres in APAC. The high investor appetite for these asset classes is attributed to the growth in e-commerce.
“During the whole of 2021, we are very focused on looking for defence strategies, looking to new asset classes, I think we’ll continue to chase what we would see as stable income and still this kind of insatiable appetite for yield,” Couse said. —Doreen I.
Source: Bloomberg Markets Asia
