The New Equations In APACs Real Estate Industry
Anshuman Magazine
Chairman & CEO-India, South East Asia, Middle East & Africa
Exciting times are ahead, with a lot of opportunities and challenges. In an exclusive interaction with CEO Insights, Anshuman Magazine, Chairman & CEO India, South East Asia, Middle East & Africa, CBRE walks us through the changing real estate landscape in the region. Having been at the helm of CBRE in India for nearly three decades, Anshuman piloted the company’s India business from a handful of employees to over 16,000, offering industry leading real estate solutions via 15 offices across the country.
In conversations with Anshuman Magazine, Chairman & CEO India, South East Asia, Middle East & Africa, CBRE.
What are the trends driving the real estate industry across the Asia Pacific region?
Since 2021, Asia Pacific began to emerge from the pandemic-induced slowdown with a stable 2022 outlook, where in India and mainland China are expected to record the highest growth rates. According to our estimates, the declining rental cycle in the office and retail sectors has concluded as a result of a strong comeback in leasing demand. The logistics industry is also expected to register another good year of growth. Let’s look at a few trends witnessed in the real estate landscape.
As companies gain confidence in returning to the office and using hybrid working, we observe that quicker decision-making, flight-to-quality relocation, and workspace reconfigurations are prevalent.
E-commerce and omnichannel distribution operators will continue to drive the need for logistics space. Meanwhile, booming growth in the grocery, food production and delivery sectors is anticipated to fuel competition for cold storage space.
With more occupiers now looking for contemporary logistics facilities to improve operating efficiency and implement automation and other logistics technologies, there will be a surge in flight to-quality needs in addition to solid expansionary demands.
The transaction volume in the Asia Pacific is fore casted to have 5–10 percent year-on year growth, reaching what is anticipated to be a record high. It will be supported by strong liquidity fuelling the investment market.
With tighter environmental, social and governance requirements, occupiers are now compelled to exercise more scrutiny in selecting assets based on sustainability and wellness features. Green leases, energy audits, and resilience will feature more prominently.
Could you shed light on the recovery rate from the COVID-19 pandemic?
The Indian real estate market has mostly held up despite the COVID-19 pandemic’s ongoing cyclical swings. Due to India’s strong position as a global economic engine and optimistic growth estimates across the asset class, including office, I&L, residential, and
alternative real estate, the market has recovered strongly after the post peak pandemic period.
The second pandemic wave didn’t significantly impact the Indian economy, including the real estate market. Since then, we have advanced considerably.
In the last nine months, leasing activity has increased across all industries and market categories, and we anticipate this trend to last until the end of 2022. It is anticipated that some emerging industries, like I&L, will surpass pre-pandemic levels in terms of leasing and supply expansion. It is also expected that the market in India for alternative sectors, such as DCs, biosciences, and others., will continue to develop and offer more options for investors to diversify their portfolios.
We also anticipate a further acceleration of post pandemic structural changes. For instance, even if tech like AI and AR/VR finds more adopters in the industry, the focus on ESG is projected to emphasize across all sectors. Real estate decisions becoming a strategic factor in the boardroom is expected to have a favorable influence on the segment overall in terms of business resiliency and future investments.
Which are the key areas investors are focusing on today and why? Has the focus on environmental, social, and governance (ESG) practices influenced investor sentiment?
A business cannot survive in isolation, and the rising clamor around ESG is proof of this. Financial and economic viability are just some factors contributing to a company’s success nowadays as the world evolves. The COVID-19 pandemic, extreme weather occurrences, and the COP26 summit all contributed to the trend that climate, socioeconomic, and ethical concerns increasingly receive more attention. ESG has changed from a minor balance sheet problem to a significant aspect in investment decision making due to firms now incorporating necessary steps to create forward looking plans that consider these considerations.
The focus on developer and occupier initiatives to meet net zero goals and aid in the more significant cause of climate change is growing in the real estate sector. Demand for sustainable buildings is anticipated to increase as decarbonization pledges increase.
Future regulatory requirements for ESG adoption will become more stringent, and sustainability reporting standards and benchmarks will gain more traction. As a result, markets that take a proactive stance and consistently prioritize sustainability and solutions for reducing climate risk will be top choices as investment locations.
According to Statista’s report, life sciences real estate is a new sector of interest among investors. What are the reasons for the growing interest?
We recorded a paradigm shift in the life sciences real estate dynamic, a trend that we expect to accelerate. With India emerging as the world’s largest COVID-19 vaccine production base, this sector is now high on the radar for both corporates and investors. Both global and domestic life sciences companies display a strong appetite for expansion in the corporate office segment. Most of the country’s life sciences facilities are located in Bangalore, Hyderabad, and Pune. In India, we expect new clusters to be formed in Bangalore, Hyderabad, and other locations adjacent to Tier-I cities in 2022. The life sciences industry in India has started to move up the value chain of R&D and innovation.
Further, recent supply chain disruptions also attracted the interest of leading PE and VC players. The top investment opportunities in India would be the PPP route or asset development through Built-to-suit (BTS) properties. The life sciences industry continues to garner the interest of policymakers. States recently announced policies on life sciences that would attract investment, increase employment, and boost real estate demand.
The second pandemic wave didn’t significantly impact the Indian economy, including the real estate market. Since then, we have advanced considerably.
In the last nine months, leasing activity has increased across all industries and market categories, and we anticipate this trend to last until the end of 2022. It is anticipated that some emerging industries, like I&L, will surpass pre-pandemic levels in terms of leasing and supply expansion. It is also expected that the market in India for alternative sectors, such as DCs, biosciences, and others., will continue to develop and offer more options for investors to diversify their portfolios.
We also anticipate a further acceleration of post pandemic structural changes. For instance, even if tech like AI and AR/VR finds more adopters in the industry, the focus on ESG is projected to emphasize across all sectors. Real estate decisions becoming a strategic factor in the boardroom is expected to have a favorable influence on the segment overall in terms of business resiliency and future investments.
Which are the key areas investors are focusing on today and why? Has the focus on environmental, social, and governance (ESG) practices influenced investor sentiment?
A business cannot survive in isolation, and the rising clamor around ESG is proof of this. Financial and economic viability are just some factors contributing to a company’s success nowadays as the world evolves. The COVID-19 pandemic, extreme weather occurrences, and the COP26 summit all contributed to the trend that climate, socioeconomic, and ethical concerns increasingly receive more attention. ESG has changed from a minor balance sheet problem to a significant aspect in investment decision making due to firms now incorporating necessary steps to create forward looking plans that consider these considerations.
The focus on developer and occupier initiatives to meet net zero goals and aid in the more significant cause of climate change is growing in the real estate sector. Demand for sustainable buildings is anticipated to increase as decarbonization pledges increase.
Future regulatory requirements for ESG adoption will become more stringent, and sustainability reporting standards and benchmarks will gain more traction. As a result, markets that take a proactive stance and consistently prioritize sustainability and solutions for reducing climate risk will be top choices as investment locations.
According to Statista’s report, life sciences real estate is a new sector of interest among investors. What are the reasons for the growing interest?
We recorded a paradigm shift in the life sciences real estate dynamic, a trend that we expect to accelerate. With India emerging as the world’s largest COVID-19 vaccine production base, this sector is now high on the radar for both corporates and investors. Both global and domestic life sciences companies display a strong appetite for expansion in the corporate office segment. Most of the country’s life sciences facilities are located in Bangalore, Hyderabad, and Pune. In India, we expect new clusters to be formed in Bangalore, Hyderabad, and other locations adjacent to Tier-I cities in 2022. The life sciences industry in India has started to move up the value chain of R&D and innovation.
Further, recent supply chain disruptions also attracted the interest of leading PE and VC players. The top investment opportunities in India would be the PPP route or asset development through Built-to-suit (BTS) properties. The life sciences industry continues to garner the interest of policymakers. States recently announced policies on life sciences that would attract investment, increase employment, and boost real estate demand.
How has technology changed the functioning of the real estate industry?
The growing synergies between various technologies and real estate have accelerated. The key to this transformation is a large number of diverse data sets in addition to the ‘Big Data’ aggregated at a hyperpersonal level. Over the last few years, integrating new technologies has propelled productivity, enhanced stability, and ensured business continuity. The adoption of PropTech was further accelerated amid COVID-19 across commercial, residential, retail, and construction segments. These advancements are expected to have a long term and far-reaching impact on the industry.
Six disruptive technologies that are reshaping businesses worldwide and significantly impacting real estate are Software-as-a-Service (SaaS)/ Cloud Computing, Artificial Intelligence (AI), Internet of Things (IoT), Robotic Process Automation (RPA), Virtual Reality (VR)/Augmented Reality (AR) and Blockchain. According to our assessment, we foresee how all RE stakeholders developers, investors, occupiers, and employees are currently being influenced/would be influenced in the future by these technologies across the life cycle of an office building.
Could you draw a futuristic picture of how the real estate industry would turn out in the long run?
India has been on a progressive path of growth for several years, and so has the real estate industry. The implementation of focused policy reforms and strategic infrastructure initiatives by the state/central government has resulted in consumer preference leaning towards suburbs / non-metro cities. As a result, tier II cities are gaining traction owing to their growing economic significance, infrastructure development, and improved connectivity. The entry and expansion of flex operators and the increasing footprint of industrial establishments evidence this. The various business clusters across tier-II cities now offer a mix of non-SEZ and SEZ establishments. Most tier II cities have also recorded a growing presence of industrial hubs and malls. Retailers and mall developers are looking to leverage the buying power of the increasing populace in these cities.
Growing internet usage has whetted the appetite for quality products in these areas, thus giving a fillip to e-Commerce too. There has also been rising investor interest over recent years, with various plans announced by domestic and global firms to establish their footprints in these markets. As we move forward, Tier-II cities are poised to be the new growth vectors in India in the coming years driven by their progress in the real estate landscape, work environment, quality of life, and sustainability. Moreover, these cities have large talent bases, and taking offices closer to talent holds the potential to be alternative centers of growth, fueling innovation and growth for office occupiers. Hence, it is increasingly critical for these cities to sustain the current pace of infrastructure development and strengthen skill development.
The future of real estate will incorporate climatic, societal, and ethical issues as it moves into the limelight. Businesses are increasingly finding it imperative to develop forward looking strategies that consider ESG principles. As a result, ESG is fast evolving and would be a key component of the real estate landscape.
Over the years, we’ve focused on overseeing transformational change and delivering real estate services for major multinational corporates while embracing market leading digital solutions to help drive success for clients, employees, and stake holders. I believe Indian real estates transformative journey is expected to continue, and we will be a part of it.
Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE
Having been at the helm of CBRE in India for nearly three decades, Anshuman piloted the company’s India business from a handful of employees to over 16,000, offering industry leading real estate solutions via 15 offices across the country.
The growing synergies between various technologies and real estate have accelerated. The key to this transformation is a large number of diverse data sets in addition to the ‘Big Data’ aggregated at a hyperpersonal level. Over the last few years, integrating new technologies has propelled productivity, enhanced stability, and ensured business continuity. The adoption of PropTech was further accelerated amid COVID-19 across commercial, residential, retail, and construction segments. These advancements are expected to have a long term and far-reaching impact on the industry.
Six disruptive technologies that are reshaping businesses worldwide and significantly impacting real estate are Software-as-a-Service (SaaS)/ Cloud Computing, Artificial Intelligence (AI), Internet of Things (IoT), Robotic Process Automation (RPA), Virtual Reality (VR)/Augmented Reality (AR) and Blockchain. According to our assessment, we foresee how all RE stakeholders developers, investors, occupiers, and employees are currently being influenced/would be influenced in the future by these technologies across the life cycle of an office building.
Could you draw a futuristic picture of how the real estate industry would turn out in the long run?
India has been on a progressive path of growth for several years, and so has the real estate industry. The implementation of focused policy reforms and strategic infrastructure initiatives by the state/central government has resulted in consumer preference leaning towards suburbs / non-metro cities. As a result, tier II cities are gaining traction owing to their growing economic significance, infrastructure development, and improved connectivity. The entry and expansion of flex operators and the increasing footprint of industrial establishments evidence this. The various business clusters across tier-II cities now offer a mix of non-SEZ and SEZ establishments. Most tier II cities have also recorded a growing presence of industrial hubs and malls. Retailers and mall developers are looking to leverage the buying power of the increasing populace in these cities.
Growing internet usage has whetted the appetite for quality products in these areas, thus giving a fillip to e-Commerce too. There has also been rising investor interest over recent years, with various plans announced by domestic and global firms to establish their footprints in these markets. As we move forward, Tier-II cities are poised to be the new growth vectors in India in the coming years driven by their progress in the real estate landscape, work environment, quality of life, and sustainability. Moreover, these cities have large talent bases, and taking offices closer to talent holds the potential to be alternative centers of growth, fueling innovation and growth for office occupiers. Hence, it is increasingly critical for these cities to sustain the current pace of infrastructure development and strengthen skill development.
The future of real estate will incorporate climatic, societal, and ethical issues as it moves into the limelight. Businesses are increasingly finding it imperative to develop forward looking strategies that consider ESG principles. As a result, ESG is fast evolving and would be a key component of the real estate landscape.
Over the years, we’ve focused on overseeing transformational change and delivering real estate services for major multinational corporates while embracing market leading digital solutions to help drive success for clients, employees, and stake holders. I believe Indian real estates transformative journey is expected to continue, and we will be a part of it.
Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE
Having been at the helm of CBRE in India for nearly three decades, Anshuman piloted the company’s India business from a handful of employees to over 16,000, offering industry leading real estate solutions via 15 offices across the country.