13. Investment Talk Asia-Pacific:

12 October 2020 – In our „Investment Talk Asia-Pacific“ we took a closer look at the current investment environment of the APAC region. With our guests Jason Lee (AEW Asia Pacific) and Laurent Jacquemin (AXA Investment Managers) Terence Tang (Colliers Singapore) and I discussed the region’s role as a trendsetter for global capital flows.

One step ahead

The markets of the APAC region were hit by the COVID pandemic earlier than the rest of the world. Therefore, they also serve as indicators for possible scenarios of economic recovery. In the APAC region, transaction volumes in the real estate market already collapsed at the turn of the year, but the recovery is now obviously beginning to take hold.

The effects of the crisis in APAC

Since early 2020 international capital in particular has been held back by investors or flowed primarily into low-risk core products. Domestic investors were able to take advantage of this caution and increased their share of the transaction market thanks to their in-depth market knowledge with local teams. The asset classes multifamily, logistics and data centres were particularly considered to be current investment targets. Office properties in stable locations continue to attract investors as well.

Hotels and retail properties are having a difficult time in the APAC real estate market and are considered to be more risky due to travel restrictions and social distancing regulations. Many owners in these asset classes are already looking into possibilities of conversion, for example into grocery anchored retail or serviced appartments

Office: Change of space requirements?

The trend towards mobile working is said to have little impact on the general office space requirements of companies in Asia-Pacific. On the one hand, the average living space in this region is comparatively small and only serves as a pull factor to a small extent. On the other hand, the distance rules force companies to create more space per employee.

Even if the offices are less occupied corporates have to fully utilize their premises. Subletting is only considered a temporary trend without a long-term perspective, whereas satellite offices in B-locations could become more popular in the medium term, especially in metropolitan areas if social distancing remains necessary.

Banks remain skeptical

Many banks in the APAC region are still cautious to finance risky investments and act very selectively. Accordingly, LTV (Loan to Value) ratios are set at a more moderate level than before the crisis – but also in this sector a trend towards normalization can be seen.

Back to success

All in all, the conditions on the Asia-Pacific transaction market have stabilized in recent months, domestic and foreign capital is flowing into real estate investments strongly again and market observers are confident that APAC will soon be able to build on the successes before COVID.