SINGAPORE, 19 January 2022 – As we collectively forge towards a post-COVID world, an increasing number of investors are adapting and turning towards alternative real estate sectors to deploy their capital as they are deemed to be less susceptible to economic headwinds. The enlarged scope of coming-of-age opportunities in such new economy assets is underpinned by new ways of working, demographics shifts, tech-enabled lifestyle changes of consumers and occupiers as well as repositioning of assets.
EDMUND TIE’s Head of Research and Consulting, Mr Lam Chern Woon said, “The rise of the millennials and fast-ageing populations have driven up the popularity of new economy assets to suit their real estate and lifestyle needs. In spite of current economic uncertainties, alternative real estate assets’ exceptional resilience and generally higher yields and potential growth have gained investors’ favour, enhancing the diversity of their investment portfolios and strengthening the risk-reward ratio in the process.”
As the future of work shifts irrevocably towards a hybrid working model, investments in co-working spaces have been gaining prominence. Co-working spaces entice occupiers due to their flexible leasing terms and well-designed spaces enable the reinvention of working environment. Landlords have responded to this demand by developing innovative long-term office space (Core) and shorter-term flexible offices (Flex) model to reinvent their offerings and increase the appeal of their assets.
Today’s fast sharing economy is emblematic of the rising demand for co-living spaces, especially from the millennials who are attracted to the concepts of flexibility and convenience. Additionally, the entrenchment of work-from-home (WFH) practices brought about by the pandemic and the desire for privacy have propelled people across various age groups to renting. Furthermore, some homebuyers facing pandemic-related construction delays are renting co-living spaces in the interim.
Observing a trend in demographic and lifestyle shifts, Mr Lam commented, “There is a growing preference for renting, especially from millennials who value flexibility. In the APAC region, Japan is the sole established multi-family market which garners a high level of investor interests and activity. However, Australia’s multi-family sector is another market in the region with growth potential.”
Against the backdrop of fast-ageing populations in many regions globally, there is rising demand for senior care services and retirement communities. Investment interest in this sector is also picking up.
Accelerated by the pandemic, the fast-growing digital era is characterised by the rapid adoption of the latest technology trends, such as 5G network, artificial intelligence, big data, Internet of Things (IoT), Industry 4.0 and e-commerce. The corresponding surge in cloud computing and data storage requirements has accentuated the investment appeal for data centres. However, the tight local supply of data centres arising from a current moratorium on construction of new data centres has led data centre players to focus largely on overseas acquisitions. Acknowledging the large energy consumption of data centres and the impact on the environment, some asset owners have implemented solutions in line with their Environmental, Social and Governance (ESG) sustainability agenda.
Another emerging niche asset is cloud kitchens. Locally, the share of online F&B sales has surged significantly during the pandemic. The proportion of online F&B sales has more than doubled to 22.4% in 2020 from 8.8% in 2019. The share rose further to 32.6% for the first eleven months of 2021.
Mr Lam commented, “The pandemic has created more opportunities for well-capitalised investors to strengthen resilience of their property portfolios through repositioning of assets, or to gun for value-add investment plays. Some investors seek to diversify their portfolios through greater exposure to alternative real estate asset classes such as purpose-built student accommodations, while others explore the repurposing of their acquired assets, which include carparks and hotels, to higher-value uses.”
Alternative real estate investments are anticipated to capture a greater stake in molding the future of capital flows, although traditional real estate assets will likely continue to dominate the market. The pandemic has magnified the attractiveness of alternative real estate investments and more investors are expected to seek exposure and tap on its potential growth. In 2022, data centres and life sciences are two niche sectors poised for exceptional investment prospects.. Other emerging trends within the life sciences and biopharmaceutical industries may lead to a possible rise in investments in other types of new economy assets such as vaccine facilities.
Even as investors look to include niche real estate sectors in their radar, they should be mindful of some key trends that could impact the investment potential and flexibility. With the ESG agenda rising to the forefront of decision-making efforts, investors are fast adopting green finance to benefit from more favourable financing terms and higher yields. Flexibility in usage is key in a dynamic pandemic environment to allow investors to continuously adapt the usage of their assets. Lastly, the digitalization drive has wide-ranging implications from consumer data analytics to property management.
For further information, please contact:
Chan Yee Yin (Ms)
Head, Corporate Communications
O: + 65 6393 2369
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