38 ASIAN LEGAL BUSINESS – MAY 2024 WWW.LEGALBUSINESSONLINE.COM The real estate landscape in Asia has been experiencing volatility in recent years with China’s property crisis sending shockwaves across the region. According to the CBRE, the office real estate market will continue to be awash with a supply boom in the remainder of the year. In the retail space, Asia Pacific will see weaker spending growth in 2024 on the back of the softer economic outlook. Logistics occupiers’ appetite for expansion is expected to moderate further over the next 12 months. “To protect their bottom line, occupiers will give closer scrutiny to real estate plans and capital expenditure; a trend that will result in more lease renewals. Availability will increase on the back of the ample development pipeline and growing volume of sublease space,” said the CBRE report. Meanwhile, commercial real estate investment is expected to remain muted in the first half of 2024 but is expected to see an uptick in investment activities in the second half of the year on the back of re-pricing and interest rate cuts. Demand will be led by high-networth buyers, cash-rich investors and corporates seeking high quality assets, according to CBRE. But some bright spots have been emerging in the sector. In Southeast Asia, things appear to be looking up compared to other parts of the AsiaPacific region. David Lim, the Singapore-based director and head of legal for South Asia at Hongkong Land, says demand continues to be robust due to strong demographic factors such as a rising population, improvement in standards of living, increased workforce representation and income growth. “There also continues to be a move towards urbanisation across Southeast Asia, which drives the demand for highquality residential housing in urban centres,” Lim adds. Manish Lamba, general counsel at DLF Cyber City Developers, the rental arm of India’s DLF, says his country is witnessing one of the fastest-growing real estate sectors amongst the world’s major economies. Specifically, Lamba highlights the growing attractiveness of real estate investment trusts (REIT) as an investment avenue as well as an exit option for investors in the Indian real estate market. “Till date India has seen launch of four REITs (three commercial and one retail), which have now fairly stabilised and are gradually gaining momentum. With adjustment of interest rates, REITs are a good source of alternative investment,” says Lamba. With the success and growing popularity of REITs, the Securities and Exchange Board of India has recently introduced the concept of small and medium REITs in order to enable small and medium-scale investors to participate in the fractional ownership of real estate which they are not able to afford otherwise, adds Lamba. In Singapore, Lim has noticed a push towards development of regional centres supported by a comprehensive infrastructural framework. He also notes the increased emphasis on value and quality from the part of buyers. “For example, in Singapore, when we match the very best quality of design and build with a great location, the market continues to respond positively. An example of that is Leedon Green at Leedon Heights that has now 100 per cent sold,” explains Lim. Throughout 2023, the high interest rates have been weighing on the real estate market in the Asia-Pacific region, resulting in subdued year for leasing and investment. But as the tightening monetary cycle is set to stabilise, if not loosen, in the second half of this year, Lamba has seen some investment bright spots in his sector. “Fortunately, interest rates have been within the tolerable limits. Presently the SBI PLR is 15 per cent and SBI MCLR is eight per cent, which gives good opportunity to refinance external debt and to restructure the debt instruments,” says Lamba. Lim of Hongkong Land, however, sees buyer appetite undercut by the heightened cost of financing and the added emphasis on affordability. “Similarly, developers are faced with the reality of increased borrowing costs, which can affect their ability to deploy capital for new projects. In order to address this, we have been collaborating more with partners in order to share expertise and resources, but we have also been more REAL ESTATE LANDS OF OPPORTUNITY With heightened refinancing costs impacting property values and changing consumer behaviour stifling demand for commercial and residential real estate in the Asia-Pacific region broadly, South and Southeast Asia have stood out with pockets of optimism in this sector. General counsel of two major real estate companies discuss the current situation on the ground, and what future holds for the industry. BY SARAH WONG
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