Asia-Pacific Real Estate Outlook

1. The lasting impact of Work-From-Home on workplace strategies

The grave healthcare crisis brought about by Covid-19 has brought the world together to partake in the great Work-from-Home (WFH) experiment. As economies and workforces have now had a taste of WFH, and remote working in general, the habits and preferences of many may be changed in the long run. However, while much talk has come of the topic of WFH replacing the traditional workplace, we wish to temper expectations, and provide nuance in the discussion.

There is still an important place for the traditional workplace going forward. We see offices, particularly core assets in CBD areas, to continue being places of collaboration and innovation, as face-to-face interactions still trump technology at promoting them. Moving forward, elements of flexibility and mobility of the workplace will be in greater demand, but we do not foresee a complete replacement of the workplace by remote working or WFH.

2. The 2020 outperformer – Logistics

As Covid-19 devastated the traditional retail business model, e-commerce has picked up the slack in terms of fulfilling consumer demand. Like with the WFH experiment, some of the shopping behaviours formed over the course of 2020 may prove sticky, and in 2021 we expect that improved online retail spending and e-commerce penetration will translate to a year of outperformance for the logistics sector.

The underlying changes that are supporting this positive performance are the rapid adoption of 5G and the movement towards an Internet-of-Things (IoT), and these have been ongoing for a while now. Governmental and foreign direct investments into infrastructure will also support the growth of supply chain and logistics going into the new year. Furthermore, with some versions of the Covid-19 vaccine requiring cold storage and cold chain logistics infrastructure, this improves our expectations for the sector’s performance in 2021.

Many established logistics actors are already beginning to think about supply chain resilience. The uncertainty brought about by 2020 has had them thinking about their China+1 strategies to decrease their reliance on a single geography for operations, while the general philosophy of Just-in-Time fulfilment is now also shifting towards Just-in-Case.

3. Investors targeting distressed property fire sales may be disappointed

We expect disappointment will come the way of opportunistic investors circling the APAC property markets in 2021. The months following the advent of the Covid-19 pandemic, we saw only some price adjustments in the APAC property markets. The expectations that there would be fire sales for assets, even in more distressed sectors such as retail and hospitality, were largely wrong in 2020.

Quick and effective governmental responses to the virus across the region, along with supportive monetary and fiscal policies have helped kept markets buoyant. We maintain this cautious optimism for 2021, and we think that will translate to stable prices going into the next year. Those seeking greater discounts will have to move up the risk curve to achieve their targets.

4. Monetary policy continues to be supportive of residential markets

Ever since the 2008 subprime mortgage crisis, policy makers worldwide have learned the importance of residential property markets. What we have observed in the APAC markets is governments and central banks supporting this sector using monetary, fiscal, and other policies to keep prices afloat, to prevent another severe destruction of wealth in their economies.

As markets around the region return to relative normalcy, with talks now of markets opening their borders, buyer sentiment in APAC is beginning to recover supporting demand. The possibility of travelling across borders once again in 2021 and existing policies supporting high liquidity are encouraging investments from high net-worth individuals, and this will continue to support home prices. In fact, 17 out of 22 markets tracked by Knight Frank Asia-Pacific are expected to see prices stable or increase in 2021.

5. Real Estate to contribute to Greener recovery

Climate change and environmental issues have become increasingly in the forefront of public consciousness. The announcement of China’s goals to become carbon neutral by 2060 and the appointment of John Kerry as the first ever US climate leader are signs of this shift in mentality globally. The rest of the world and APAC will take cues from these symbolic gestures, and we expect the green agenda to be a pertinent part of the 2021 story.

As real estate contributes to 40% of the world’s carbon emissions, according to The Global Alliance for Buildings and Construction, we expect to see developers, end-users and creditors place greater emphases on sustainability and environmental considerations in the built environment. We have already observed the proliferation of initiatives such as green loans and zero-energy real estate become more mainstream over the past few years, and this will be a mainstay of 2021 and beyond.

6. Relaxation of US-China tension to boost APAC recovery

Our expectations from current observation is a continued pursuance of the US on being tough-on-China. However, president-elect Joe Biden will choose to arrive at this goal through less direct means than the current administration has and we should see the US re-engage with multilateral institutions and agreements. This will likely lead to an easing of tensions between the two economic superpowers, which is good news for markets in the region.

Less uncertainty and greater cooperation between them will see business sentiment improve across many markets in APAC. With Covid-19 largely coming under control in the region, APAC should be pushed into a phase of recovery that will outpace the rest of the world’s regions.
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To read the full Asia Pacific Real Estate Outlook Report, click here.

Recently, Knight Frank Asia Pacific hosted the Asia Pacific Outlook 2021: The CEO Perspective where our managing Director Kevin Coppel hosts Regional CEO’s from NTT Ltd., Deloitte Asia Pacific and Lendlease in a discussion about the challenges and opportunities brought on by the accelerated business transformation agenda in 2021. The esteemed panel delved into topics such as the role of the workplace for their businesses, mental health, the role of information and digital technology and sustainability issues.