Increased travel, the rise of e-commerce and a change in working habits are three trends that will impact the real estate investment trust (REIT) market, says Chua I-Min, a trainer with SGX Academy, the education and training arm of the Singapore Exchange.
On the first trend, Chua believes that with more people travelling, there will be greater demand for hotels in the future, impacting hospitality-type REITs positively. “It’s more common now for people to go for short-term stays compared with a decade ago,” he said at the EdgeProp Focus event on investment options in real estate.
But Chua is not as worried about the impact of sharing economy models such as Airbnb on the global hotel industry. “It’s actually a very different target market,” he later tells EdgeProp in an interview. Business travellers and people who are used to staying at five-star hotels will not opt for Airbnb; it will attract only travellers from “a certain segment”, he says. In fact, business travellers make up a high proportion of demand for hotel stays, adds Chua.
The Singapore government has always monitored the short-term rental market closely. In April, it launched a public feedback on a new policy that will allow Airbnb-type rentals only if 80% of all residents in the development agree to it. To date, the minimum lease period for short-term stays is three months, a change from a minimum stay of six months last June. Two homeowners were recently sentenced to $60,000 fine and 12 weeks in jail each for providing unauthorised short-term stays to guests on Airbnb.
Noting government regulations, Chua adds that it is “not so straightforward” for Airbnb to disrupt the existing hospitality market.
On the second trend, Chua believes e-commerce will impact two kinds of REITs — industrial and retail. The demand for warehouse space will rise to support increased global e-commerce activity, he says in the interview. This has also changed the purpose of warehouses, from solely storage to one that includes automation — capabilities to sort, pick and pack goods, Chua explains.
The National Trades Union Congress, for instance, is building a 2.8ha storage warehouse with Surbana Jurong — Temasek-owned infrastructure and urban development consultancy — that will automate the goods- sorting process. This is slated for completion in 2021.
Retail spaces, however, will have to compete with global e-commerce demand, which “still has a lot of room to grow”, he tells EdgeProp. In the future, “one-third of malls will be gone, but the other two-thirds will do very well”. Malls that are well-managed and have clear themes will remain relevant. For instance, shoppers will still visit high-end malls when they shop for luxury goods, he points out.
On the third trend, the flexible working culture will affect the future office market outlook. “It’s already happening — you don’t have to physically be in the office to work,” Chua says. There is also the trend of hot-desking or activity-based working, where no one seat is specially assigned to a person, and employees are free to plan out their sitting arrangements for greater work efficiency.
A survey conducted by CBRE Asia Pacific in 2017 found that by 2020, 63% of MNCs have set a target of providing a space of less than 100 sq ft for each employee.
Increased workplace flexibility, however, will benefit certain REITs — business parks will gain from the move of back-office operations away from the CBD, where rentals are costlier. Chua observes this happening in the financial industry, from SGX moving its back-office staff to One- North and banks placing back-office functions in Changi Business Park, for instance.
The EdgeProp Focus event, held by EdgeProp Singapore in collaboration with SGX Academy on April 27 at SGX Centre, was attended by over 100 participants.
In his address, Kam Tin Seah, chief operating officer of Singapore-listed Pacific Star Development (PSD), spoke about the firm’s bullish outlook on Asean. Among the reasons cited were a population of over 630 million that can back up housing and hospitality demand; a strong concentration of young demographics in countries such as Indonesia, Vietnam and the Philippines; and rapid urbanisation in all Asean cities.
On PSD’s flagship development, Puteri Cove Residences and Quayside in Iskandar Malaysia, Kam tells EdgeProp that 80% of the residential units have been sold. Half of the buyers are Singaporeans, out of whom 60% are private investors. The RM1.75 billion ($593 million) freehold, mixed-use project spans two 32-storey towers with 329 units each; a tower of Pan Pacific serviced suites; and a Soho and lifestyle retail centre. Prices range from RM900,000 for a one-bedroom unit of 680 sq ft, to about RM2.8 million for a three-bedroom unit of 1,800 sq ft.