Knowledge Hub

With the acceleration of digitalisation as well as changing consumer behaviour, it is imperative for retail tenants and landlords alike to adapt to the rapidly-evolving multiplatform retail scene to remain relevant, retaining the physical shopper catchment in shopping malls through an online presence. Malls should no longer purely be just a point of sale, but also extend towards being a focal point that incorporates meaningful and memorable experiences that are able to resonate with the varying consumer needs. This would make for an in-store shopping environment that is more enjoyable and appealing than just traditional brick-and-mortar shopping or mere e-commerce, as part of their placemaking strategy.

With Singapore in Phase Three of Re-Opening, increased footfall to retail spaces is expected with the relaxation of measures for gatherings and a majority of the workforce back to the workplace.

The recent slowdown in rental declines of prime retail spaces point to a potential bottoming out of rents by early 2021, and any rental reduction during the year is projected to be about 5%, barring lockdowns as a result of recurring community infections. Rentals of prime retail spaces located in Orchard might require a bit more time to recover and are expected to only return to pre-COVID-19 levels once mass vaccinations prove successful enough for the nation as well other key cities to relax travel restrictions.

Most property markets in the Asia Pacific region ended a challenging year on the path to recovery, thanks to strong performances by the office, industrial and logistics segments. In China, a combination of government policies and the ongoing e-commerce boom powered demand for business parks and warehouses. Hong Kong saw a jump in transactions after the government reduced stamp duty on the sale of commercial properties, while Singapore saw a surge in investment sales amid improving sentiment. The market outlook improved in Australia as the country bounced back quickly from a recession, while New Zealand continued to reap the benefits of its successful management of COVID-19. Vietnam, which also has managed to control the spread of COVID-19 and perform better than other Southeast Asian economies in 2020, is attracting the attention of a growing number of local and foreign investors, especially in the industrial and logistics sectors. Japan is another market where logistics assets are highly sought after, reflecting growing demand from the e-commerce sector. In Indonesia, the hard-hit hospitality sector saw a surge in interest from investors looking to acquire discounted hotel assets, while fast-growing Myanmar continued to draw interest in the logistics and affordable housing segments. The residential segment is also seen trending up in the Philippines, where remittances from overseas workers is driving demand. Overall, investors are expected to act quickly to make the most of a conducive environment as markets across the region emerge from lockdowns and economies regain momentum.

A Changed Landscape

The covid-19 pandemic will leave a lasting impression on the commercial real estate sector across Asia-Pacific. While it brought more pain to the already battered retail sector, it put more wind in the sails of the industrial sector via the flourishing e-commerce industry, as many business-to-customers (B2C) firms were forced to adapt quickly as lockdown and movement restrictions in many markets prompted a huge shift to inline retail activity. Much of these activity result in higher online retail sales growth and penetration across the region, regardless of market maturity. 

This is evident when we look at the growth rate of online retail penetration across a few selected key markets across the Asia-Pacific with online penetration rates rising an average 14%year-on-year over 2020. We do not expect this growth to abate over the near-term and penetration rates should grow further, potentially reaching the regional leaders such as the Chinese Mainland and South Korea.