Knowledge Hub

The COVID-19 pandemic has exerted an unprecedented toll worldwide. In Asia Pacific, measures to flatten the curve have also ushered in the worst economic slump since the Great Depression with major economies experiencing their first contractions in more than a decade. Still, despite a crippling crisis that can take years to play out, the region’s long-term growth fundamentals remain intact.

Driven by demographic tailwinds, urbanization in the Asia Pacific is an epic boom that will drive the growth of its middle-class and with it, a cycle of rising consumption. Real assets are a play into the region’s structural megatrends that will outlive the pandemic. As the challenge increasingly turns from containment to longer-term recovery, infrastructure investments and REITs are a crucial part of this equation, to fast track the region’s recovery from the pandemic and secure its economic future.

The Singapore Business Federation introduced a Code of Conduct for Leasing of Retail Premises in Singapore ("COC") on 26 March 2021. The COC aims to provide a set of guidelines for landlords and tenants of Qualifying Retail Premises to enable a fair and balanced position in lease negotiation, and to provide such landlords and tenants with a governance framework to ensure compliance with an accessible dispute resolution framework.

The COC is effective from 1 June 2021, and it is anticipated that the Government will work closely with the stakeholders to turn the code into legislation. This Update summarises the key features and principles of the COC.

Stock markets in the Asia Pacific endured bouts of volatility in February, triggering flashbacks to the taper tantrum that roiled the region back in 2013. The US 10-year Treasury yields rose to a one-year high, as massive government stimulus is seen to fuel higher economic growth and inflationary pressures; the low rates currently pursued by the Fed is unlikely to be sustainable in the face of an improving economy and rising commodity costs. Asian bond yields pushed higher against the backdrop of the spike in long-dated Treasury yields, a precursor to further turmoil in equity markets as it diminishes the appeal of a stock’s dividend yield, compelling investors to rebalance their portfolios in a hunt for value.

Listed Real Estate
The rotation lifted the GPR/APREA Listed Real Estate Composite above REITs and overall equity indices, powered by developers listed on the China and Hong Kong bourses. Rules to centralize and limit land sales to only thrice a year are the latest in a series of policies to tame property prices on the Mainland with as many as 22 city governments including Beijing, Shanghai and Shenzhen reportedly expected to abide by the new measures. Investors are optimistic that more rational bids could result from these supply-side policies, leading to better profit margins. Indonesian stocks also outperformed after the country’s central bank slashed interest rates and reduced downpayments on property purchases.

REITs
Despite coming under selling pressure in response to the sudden hike in sovereign bond yields, Asia Pacific REITs gained with the GPR/APREA Composite REIT Index reversing the decline experienced in January. Hong Kong REITs stood out, returning over 7.0% as vaccine optimism raised expectations of a rebound in the retail sector. Those in Japan also rose, led by its Hospitality and Office REITs.
Australian and Singapore REITs were the only markets that softened in the region, as the spike in bond yields drove weakness in its Industrial REITs, spurring rotational interest into the more cyclical Retail and Office sectors.

Meanwhile, the Philippines is setting a blistering pace in expanding the REIT universe in the region. Eight months after the debut of Ayala Land REIT, the country will have its second REIT – DDMP REIT – list in March. A portfolio that includes offices situated along a stretch of the capital’s main thoroughfares allowed developer DoubleDragon Properties Corp. to price its REIT IPO at the higher end of its indicative range. With PHP14.7 billion raised, it stands – for now – as the country’s largest REIT offering.

However, this is likely to be surpassed by Filinvest’s offering, who is aiming to raise PHP15 billion from investors. With three other listing on the cards, including those from SM Prime, Robinsons Land and Megaworld Corp., the Philippines is set to become the REIT IPO hotspot in the region this year.