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In the last five years, Asia’s share of the FTSE EPRA/Nareit Developed Index, the most widely followed real estate index globally, has declined from 25.0% in 2017 to 21.0% at the end of 2022.  This movement can be largely attributed to the growth of U.S. REITs, shifting the balance of power within the listed universe further to North America, whose share of the index rose from 57.1% in 2017 to 64.0% in 2022.

The growth in the U.S. REIT universe has been driven by the emergence of a wide range of alternative real estate sectors that have arisen from structural shifts in the economy and strong demand from equity investors.  The share of these alternatives in the U.S. portion of FTSE EPRA/Nareit Developed Index rose from 34.0% in 2007, to 47.5% in 2017 and 55.0% in 2022.

Growth in the U.S. listed REIT universe has been so prominent, that index constructors such as FTSE introduced capped indices, limiting the size of the U.S. component to avoid global indices being increasingly seen as ‘US & others’ and diminishing their usefulness to investors.

One might ask: Why has Asia been unable to keep pace with the growth in U.S. alternative REITs? In fact, Asia’s alternative REIT universe has grown even faster than in the U.S.. While Asia’s weight in the global REIT index fell – from 27.1% in 2017 to 21.0% in 2022, the weight of Asian alternative REITs increased from 2.3% of the global index to 3.8%, respectively. Looking only at the Asian REIT universe, alternative REITs grew their weight by an impressive 114.7%, from 8.5% in 2017 to 18.2% 2022.

This paper, written by Joachim Kehr, Head of Asia-Pacific and a Senior Partner at CenterSquare Investment Management, investigates the sectors behind the expansion of alternative REITs in the U.S. and Asia over time and explores which sectors offer the biggest growth potential for Asian alternative REITs, proposing additional steps to sustain this growth going forward.

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In the last five years, Asia’s share of the FTSE EPRA/Nareit Developed Index, the most widely followed real estate index globally, has declined from 25.0% in 2017 to 21.0% at the end of 2022.  This movement can be largely attributed to the growth of U.S. REITs, shifting the balance of power within the listed universe further to North America, whose share of the index rose from 57.1% in 2017 to 64.0% in 2022.

The growth in the U.S. REIT universe has been driven by the emergence of a wide range of alternative real estate sectors that have arisen from structural shifts in the economy and strong demand from equity investors.  The share of these alternatives in the U.S. portion of FTSE EPRA/Nareit Developed Index rose from 34.0% in 2007, to 47.5% in 2017 and 55.0% in 2022.

Growth in the U.S. listed REIT universe has been so prominent, that index constructors such as FTSE introduced capped indices, limiting the size of the U.S. component to avoid global indices being increasingly seen as ‘US & others’ and diminishing their usefulness to investors.

One might ask: Why has Asia been unable to keep pace with the growth in U.S. alternative REITs? In fact, Asia’s alternative REIT universe has grown even faster than in the U.S.. While Asia’s weight in the global REIT index fell – from 27.1% in 2017 to 21.0% in 2022, the weight of Asian alternative REITs increased from 2.3% of the global index to 3.8%, respectively. Looking only at the Asian REIT universe, alternative REITs grew their weight by an impressive 114.7%, from 8.5% in 2017 to 18.2% 2022.

This paper, written by Joachim Kehr, Head of Asia-Pacific and a Senior Partner at CenterSquare Investment Management, investigates the sectors behind the expansion of alternative REITs in the U.S. and Asia over time and explores which sectors offer the biggest growth potential for Asian alternative REITs, proposing additional steps to sustain this growth going forward.

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Economy

• Significant headwinds lie ahead for Singapore’s small and open economy amid a deterioration in the external economic environment. A silver lining exists however with the reopening of China’s borders and the continued recovery in international travel and tourism. GDP growth is projected to ease to 0.5% – 2.5% in 2023.​

Office

• Prime office rents are expected to continue growing in 2023, albeit at slower rate. The softer market conditions in 2023 could provide a window of opportunity for occupiers to reset and reassess their office requirements. Tenants who are inclined to reduce their office footprint can consider upgrading to smaller but better-quality offices.

Industrial

• With a significant amount of hi-tech supply entering the market in 2023, it will be an opportune time for occupiers to evaluate their space requirements and secure quality and centrally-located space.

• Prime logistics supply for 2023 is still expected to be tight. Logistics occupiers with large space requirements should plan their expansion needs two years in advance or consider build-to-suit solutions.

Retail

• Retail rents in all submarkets will grow further in 2023, particularly in Orchard Road which is likely to benefit from the projected increase in tourist arrivals. Crowds have returned to office areas, which will stimulate leasing demand in CBD retail. Meanwhile, the suburban market will continue to register rental increases amid strong demand.

Residential

• Residential rents have seen a historic run-up since 2021 due to tight supply and robust demand. This unrelenting surge in rents is expected to face resistance in 2023 amid a significant increase in completions. Correspondingly, price growth which was underpinned by strong economic growth and rising rents is set to moderate due to a weaker economic outlook.

Capital Markets

• Despite softening investor sentiments, due to its business-friendly policies and stable political backdrop, Singapore remains a top investment destination in 2023 for investors who are looking to capture the growth potential in Southeast Asia and/or diversify their portfolios.

This report was originally published in https://www.cbre.com.sg/insights/reports/2023-singapore-real-estate-market-outlook

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As international container shipping increases, so does the need for more logistics real estate—especially in seaport markets. In this report, CBRE looks at 18 well-established and emerging seaports to understand their capabilities and connections to other ports, as well as how they influence nearby industrial real estate markets.

Key findings:

• Ocean shipping keeps growing—more than 80% of the world’s merchandise trade by volume is seaborne, of which more than half is shipped in ocean containers—driving strong demand for logistics space near seaports.

• E-commerce sales and holding more inventory to guard against supply chain disruptions are also spurring demand for industrial & logistics properties—especially those with strong transportation links to seaports.

• Transportation costs are a paramount consideration in site selection, accounting for 45% to 70% of logistics spend, versus 3% to 6% for fixed facility costs like rent.

• Ongoing risks—including persistent inflation, rising interest rates, geopolitical tensions and pandemic-related disruptions—are prompting companies to reevaluate supply chain strategies and locations.

This report was originally published in https://www.cbre.com/insights/reports/2022-global-seaport-review

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