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Singapore (November 21, 2016) –Although a soft economy and weak fundamentals continue to affect Singapore, investors are now beginning to look for a turnaround in a market with an abundance of the type of core assets that are currently in demand across the region, according to Emerging Trends in Real Estate® Asia Pacific 2017, a real estate forecast jointly published by the Urban Land Institute (ULI) and PwC. The beaten-down core space in Singapore has seen revived interest, although prices have yet to fall enough to attract serious buyers. As the only major market in Asia currently in a down cycle, funds are looking for reasons to invest there. A single big purchase has boosted transacted values from an otherwise low base, while Chinese investors were rumored to be looking in Singapore and may be early buyers given their relatively low level of price sensitivity.
On a total-return basis, benchmarks are proving more resilient across the region, although they have registered significant declines in China, Hong Kong (where mainland capital is active), and Singapore. Several experts predict that the city state will see moderate, if any, upward rent adjustments in the next 12 months.
"Singapore's low ranking in this year's report has been attributed to various factors including overcapacity in office space, falling retail sales and a residential market correction " said Dr. Seek Ngee Huat, Chairman of ULI Asia Pacific, and Chairman, Global Logistic Properties. "However, the report findings indicate that Investors still believe in the long term fundamentals of Singapore and are on the look out for investment opportunities."
“Singapore's decline in ranking, largely due to over-capacity and decline in demand, is not unexpected. Focusing on the positive, we could be close to the bottom of the cycle and we are seeing opportunities to invest. I hope, given the uncertainties in local and global economy, there will be an increase in transactions across asset classes over the next twelve months,” said Yeow Chee Keong, Real Estate and Hospitality Leader, PwC Singapore.
This year’s Investment Prospects survey shows a strong shift away from last year’s favorites, which featured core markets in Japan and Australia, in favor of emerging-market destinations, with two Indian cities topping a list which also includes Vietnam and the Philippines and Shenzhen in 5th position.Other major survey findings include steep declines in the popularity of gateway cities with the exception of Shanghai which has seen a resurgence in foreign investment over the last couple of years, despite high prices.This overarching shift reflects the difficulty in sourcing core assets in an environment where owners have few other places to invest their capital if they sell, together with the growing urgency of investors’ ‘quest for yield’ as returns are squeezed ever lower.
The top five markets for investment and development in 2017:
• Core assets continue to be the favored asset class, although product is becoming increasingly hard to source. One way around this is for investors to assume development risk by pursuing “build-to-core” projects. Although these are not traditionally considered a core strategy, many core investors are now willing to adopt this approach, especially when it involves buyers such as insurance companies that are likely to be long-term holders of the end product.
• Investors with a mandate for higher return strategies continue to migrate up the risk curve, both in terms of sectors—pursuing niche strategies such as sub-logistics facilities or data centers—and geographically, with emerging markets such as India drawing increasing attention.
• Investments in metropolitan areas have become a popular theme given ongoing trends of urbanization, land shortages in city centers, and low returns from central business district projects. Cities across the Asia Pacific including Sydney, Shanghai, Mumbai, and Jakarta are engaged in major transportation construction projects that link suburbs or satellite towns to city centers.
• In line with markets in the West, Asia is embracing the shared economy. The last 12 months have seen huge growth in the adoption of shared workspaces, either as standalone businesses that rent open-plan office facilities to individual or corporate users, or on a corporate basis, as large companies scrap conventional office layouts and embrace hot-desking and collaborative working environments. On the residential side, shared spaces are also becoming more prominent as rising prices continue to shrink apartment footprints.
Emerging Trends, which is being released at a series of events across Asia over the next several weeks, provides an outlook on Asia Pacific real estate investment and development trends, real estate finance and capital markets, and trends by property sector and metropolitan area. It is based on the opinions of 604 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
The full report is available on: http://asia.uli.org/wp-content/uploads/sites/2/2015/09/ET_AP-2017_v8-TEXTCOVER.pdf
About the Urban Land Institute
The Urban Land Institute (www.uli.org) is a global nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has almost 40,000 members representing all aspects of land use and development disciplines.
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