Global real estate: Beds, sheds and meds

RACHEL TONG, MANAGING DIRECTOR AND HEAD OF REAL ESTATE PRIVATE EQUITY, VALUE PARTNERS


A taste for Tokyo: We see Tokyo as the most preferred city for investment in 2021. The city has ranked in the top-three most popular destinations since 2018 owing to its availability of high-quality assets and strong liquidity. Secondly, although CBD [central business district] office rents in Singapore declined in 2020, rents are forecasted to register growth over the next three years, supported by low vacancy and strong demand. Singapore remains an important hub for foreign corporations looking to access Southeast Asia and is also emerging as a viable alternative to Hong Kong among companies establishing Asia-Pacific headquarters.


The Korean market is also an area to pay attention to and the investors retain a strong appetite for modern logistics properties in Greater Seoul.


For the challenges, as many government support programmes come to an end in 2021, the commercial real estate market is expected to receive significant amounts of stressed or distressed assets to be released. In Asia-Pacific, government funding to support local economies put commercial real estate transactions on hold as asset owners had yet to feel the pressure to sell and buyers were taking a wait-and-see attitude.


In China, as the government continues to tighten bank financing, both large and small developers are looking to all assets to meet debt obligations or to fund new land acquisitions. China’s residential sector is most vulnerable to distress selling as oversupply has surfaced in some areas. However, the demand for residential assets remained strong during the ‘Golden Week’ in October, [when] residential developers can avoid a credit shortage if they are willing to cut the sales prices.


The impact of the pandemic has added another layer of stress to India’s developers on top of the 2019 crackdown of developer-finance irregularities. It is estimated that about 95% of Indian developers are facing potential cash and liquidity shortages.


Popularity contest: We always liked the logistic centres and data centres, even before the pandemic period. With the pandemic boosting demand for industrial and logistics property over the course of 2020, the sector was named the most popular for investment in 2021. Data centres were the subject of stronger interest as a surge in demand for video-conferencing and other platforms to support remote working led to increasing requirements for data storage. As data centres require considerable expertise to secure and operate suitable sites, partnering with experienced operators remains the preferred entry route for investors.


We should see an increasing opportunity for investors to partner with second-tier data centre operators in need of equity investment to expand their capacity and footprint.


Separately, there continues to be strong interest in real estate debt, with this year likely to bring a host of opportunities, particularly in China, where the government recently imposed new caps on bank lending to developers. This is likely to force developers to utilise private debt.


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