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SHANGHAI (4 December 2020) – The success of Asia Pacific governments in containing the spread of COVID-19 has helped limit its impact on local real estate markets, but there are growing concerns that a correction may be on the cards for the overall region next year, according to the 2021 Emerging Trends in Real Estate® Asia Pacific report. Despite this, China remains by far the most robust economy with three of its cities – Shanghai, Shenzhen and Guangzhou – featuring in the top ten for investment prospects. The 15th edition of the regional real estate forecast report is jointly published by the Urban Land Institute (ULI) – the world’s oldest and largest network of cross-disciplinary real estate and land use experts – and PwC.

China’s economy has seen a remarkable rebound following its successful containment of the coronavirus with gross domestic product (GDP) growth registering 4.9 percent in the third quarter of 2020, according to official figures. The report identifies that urban regeneration has been booming across China with city governments looking to create inner-city land but notes that investment prospects vary widely by location. The domestic economy remains strong, while the report notes a sound of caution that there is still the prospect of pressured sales caused by macro-economic reform initiatives – in particular, a liquidity squeeze is creating bank financing challenges for smaller developers.

Hei Ming Cheng, Chairman of ULI China Mainland and Founder,Chairman of KaiLong Group, said: “The black-swan event of the pandemic has felled the world’s economies, with the apparent exception of China. There has been a focus on tapping domestic demand, and foreign capital has also seen China as an important destination despite ongoing geopolitical uncertainties in the world.

“China’s strong economy – combined with increased demand for alternative finance resulting from a regulatory squeeze on domestic bank lending – has boosted opportunities for foreign buyers, particularly those investors with boots on the ground. Policy easing measures introduced to offset the impact of the pandemic have now been withdrawn, so investors will remain alive to what effect that will have on the market.”

Sally Sun, PwC China Assurance Partner, said: “Some of the trends that we had seen in Chinese real estate prior to the pandemic have been accelerated. For example, in retail, online sales represent a higher proportion than in any major economy in the world, but conventional retail malls has also been rapidly diversifying along omni channel and experiential lines making the sector able to withstand the impact of the pandemic better than other countries.

“China is well placed to take advantage of opportunities in data centres and logistics, which are the sought-after asset classes. China has seen incredibly fast growth In data centres with spending at almost US$1.5 billion in tech, telecom and data centre deals recorded in the year to 2020. It also remains by far the biggest market for new logistics construction given its huge and rapidly expanding market, together with a structural undersupply of logistics facilities.”

Outside of China, Singapore, Tokyo and Sydney continue to rank as the top three markets for investment and development prospects in the Asia Pacific region. These markets are each promising a sense of safe harbour in an increasingly hostile global environment, both in terms geopolitical and economical risks.

David Faulkner, President of ULI Asia Pacific, said: “The Asia Pacific region has been remarkably resilient to the challenges faced by coronavirus, particularly compared to Europe and North America, but we expect to see some market correction. Despite the common rhetoric that the pandemic has ignited many changes to our society, what we have seen so far in the real estate sector is an acceleration of trends already underway before the arrival of COVID-19. ESG themes are one example of this, as is a movement by developers towards designing general-purpose structures that can be adapted to serve multi-purposes over their lifetimes.”

The report highlights that logistics will probably be the asset class that emerges from the pandemic strongest as it continues to witness sustained demand, driven by a number of cyclical and structural drivers, in particular the robust growth in e-commerce. Meanwhile, residential sectors in the Asia Pacific region have remained surprisingly resilient to the impact of COVID-19, despite threats of economic downturns. In an environment of uncertainty, this upbeat consumer sentiment, together with an equally reliable long-term mortgage and rent payment track record, earmark the residential sector as a defensive asset class that investors in the region are now targeting.

Other trends of note cited in the report include:

• Asian companies are divesting real estate corporate assets in the form of sale-and leaseback transactions;
• Positive signs pointing to growing demand for green debt in the Asia Pacific region;
• Respondents in the Asia Pacific region tend to be less in favour of a long-term work-from-home trend;
• Travel bans have impacted markets with more international investors, such as Australia, whereas China has been less affected by this;
• There is a standoff between buyers and sellers over asset pricing; and,
• Hot desking may soon be a thing of the past.

The Emerging Trends Asia Pacific report is based on a survey of 391 real estate professionals, as well as 134 interviews, including investors, developers, property company representatives, lenders, brokers and consultants.

The full report is available at asia.uli.org/emerging-trends.

ENDS

 About the Urban Land Institute

The Urban Land Institute is a non-profit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has over 45,000 members worldwide representing all aspects of land use and development disciplines. For more information, please visit uli.org or follow us on Twitter, Facebook, LinkedIn, and Instagram. ULI has more than 2,500 members in the Asia Pacific region. For more information on ULI Asia Pacific, visit asia.uli.org or follow us on Twitter, Facebook, LinkedIn and Instagram.

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