Thinking of the future impact of this pandemic on office buildings, it may have already dawned on many of us that a majority of potential long-term trends and health measures will become permanent work-life features in the times to come.
The decline of Bangkok reflects the severe impact of the Covid-19 pandemic on the rental market in the tourism-reliant Thai economy, according to ECA’s latest survey.
Hanoi saw a similar drop of 12 places to 81st place, based on an analysis of data gathered in September 2020.
The survey uses average rental prices for a three-bedroom apartment in the mid-range of the expatriate market.
ECA International has been conducting research into accommodation costs for international executives for more than 20 years to help companies provide the right housing options as part of the overall compensation package for mobile employees. The research compares rental costs in accommodation in areas typically inhabited by expatriate staff in over 360 locations worldwide.
Hong Kong has been named the most expensive location in the world for expat accommodation for a fourth year in a row but still saw rental costs drop considerably due to the effects of Covid-19.
- Hong Kong retains its position as the most expensive accommodation for overseas workers, despite a drop of over 5% in rental costs from last year.
- The impact of Covid-19 on business travel and overseas assignments causes monthly rents to drop by an average of USD 549 to USD 10 769 (HKD 83 466).
- Taipei climbs twenty places in the latest rankings, while tourism hubs such as Bangkok and Hanoi fall.
- New York and Tokyo remain in second and third position in the rankings respectively.
“Rental prices have dropped in many locations across Asia over the past year, but this has been especially notable in locations which are heavily reliant on overseas visitors and residents, such as Thailand and Vietnam.”
Lee Quane, regional director for Asia at ECA International.
| Location | Average rent 2021 | Average rent 2020 |
|---|---|---|
| Hong Kong | 10 769 | 11 318 |
| Tokyo, Japan | 9 317 | 9 207 |
| Shanghai, China | 5 222 | 5 363 |
| Yokohama, Japan | 5 168 | 5 090 |
| Seoul, Korea Republic | 5 107 | 4 931 |
| Beijing, China | 4 599 | 4 566 |
| Osaka, Japan | 4 278 | 4 254 |
| Singapore | 4 210 | 4 233 |
| Taipei, Taiwan | 4 101 | 3 656 |
| Mumbai, India | 3 980 | 4 403 |
Asia Highlights
Cities in Taiwan all rose in the rankings this year, as rental markets saw an increase – especially Taipei which climbed 20 places to 29th most expensive location worldwide.
Quane said “Taiwan was one of the few locations in the APAC region to see significant rises in accommodation costs this year, with the average monthly rental cost in Taipei now standing at USD 4 101 – a rise of over 5% from last year. This growth was a knock-on effect of the nation’s success in mitigating the transmission of the Covid-19 virus, as well as repatriations of staff previously assigned to China and demand for talent in key industries in Taiwan which all resulted in increased demand, meaning that rents were able to stay consistent and even increase in many high-end areas.”
Meanwhile, Singapore fell one spot in the rankings to 26th position globally, as rents fell by an average of over 2%. The average monthly rent in Singapore is now USD 4 210 (SGD 5 747).
“Rent levels in Singapore are always notably stable and this year is no different, with only a slight dip in the rankings. However, this is a reversal of the increase in rental costs seen in 2019 and is likely the result of greater immigration restrictions for workers and other travellers to the city, thereby suppressing demand for all types of accommodation” explained Quane.
The decline of Bangkok reflects the severe impact of the Covid-19 pandemic on the rental market in the tourism-reliant Thai economy, according to ECA’s latest survey.
The global Covid-19 outbreak has had serious negative effects on commercial real estate, including flexible space. Of late, many operators have experienced the flexible nature of the business working against them, as many occupiers have opted to surrender desks and implement work-from-home plans.
This is particularly true of freelancers, start-ups and SMEs. Demand from corporate occupiers has been more mixed. Generally, flexible space with open plan and dense centre layouts is viewed as a higher risk. But in some markets, corporates have taken additional flexible space to satisfy business continuity and disaster recovery requirements.
As corporates return to the workplace, we expect to see them continue to leverage flexible space for these purposes, as well as for split teams and de-densification requirements. Thus, companies enable their employees to work remotely in better connected and more productive workspaces compared to home.
Landlords re-think flexible space strategy
Despite varied market conditions and end-user demand across the region, the Covid-19 outbreak has put some operators under financial strain, and we expect the consolidation of a heavily fragmented sector to accelerate as a result.
This is particularly true of operators on a straight lease, rent arbitrage model who are paying top of market rents. In the wake of operator defaults, landlords will be forced to re-evaluate the role of flexible space in their portfolios.
But we do expect them to continue using flexible space as a tool to attract and retain traditional occupiers in their buildings.
Greater China may offer some insight
Greater China may offer some insight into how landlords will respond to centre closures as operators there were making strategic adjustments to their portfolios well before the outbreak. Surrendered space can be re-purposed and leased as fully fitted-out, turnkey space to traditional tenants.
However, given current market conditions, corporates’ wait-and-see attitude and desire to avoid capex, landlords may find it difficult to backfill vacancies with traditional occupiers. Some landlords may attempt to operate centres themselves.
But landlords should be aware of potential pitfalls – flexible space is a high-touch, high-service level business which most landlords are not set up to operate.
However, a few have experienced some success although it has been difficult to compete with the professionalism and service levels of experienced operators. A third option is to bring in a new operator.
When choosing this path, landlords should be mindful of the operator’s reputation – even before the outbreak, corporate end users exhibited a clear preference for operators with a stable and profitable track record.
Long-term future of flexible space remains bright
The same fundamental demand drivers that brought about the recent structural shift in occupier markets remain intact, if not reinforced, and we believe the sector will resume growing.
However, we do expect to see landlord-operator agreements evolve with more sustainable revenue share and management contract models becoming more commonplace.
Reports suggest that during the Covid-19 downturn, operators and landlords on management contracts are cooperating and strategising in a far more symbiotic fashion.
These models align the interests of both parties, and they are more sustainable through property cycles. They reduce the risk of operator defaults whilst providing landlords with the added benefit of sharing in the upside of the centre’s profitability. Covid-19 puts flexible space markets under strain | JLL
The 65-story skyscraper at 311 South Wacker Drive in Chicago boasts magnificent views of the Chicago River, Grant Park and even Lake Michigan. However, for the owners, visibility of the building’s inner workings was more important, and more difficult to access.
To help, Zeller Realty employed a technology that exposes potential problems in the building’s HVAC systems — technology that has become exponentially more valuable during the time of COVID-19, and is often used in digital twins.
The digital twin market — the phrase used to describe a virtual copy of a physical building, combining a 3-D model of a facility with the dynamic data needed to show visualizations and analysis — is growing at hyperspeed.
Agile, scalable, and dynamic workplaces are needed now more than ever. Digital twins support these requirements by providing the data and visualizations needed to make more rapid and flexible decisions.”
Jim Whittaker, Engineering Services Lead at JLL
And real estate is one industry that has used it to uncover value during the coronavirus pandemic. Originally developed for the aerospace industry in the 1960s, digital twins are expanding their footprint across industries due to improved Internet of Things (IoT) sensors, modeling and other technologies.
The industry is projected to be worth US$35.8 billion in 2025, compared to $3.8 billion in 2019, according to research firm MarketsandMarkets.
The team at MIT’s Real Estate Innovation Lab says the benefits of digital twins for the commercial real estate industry are many, including management of building occupancy, increased budget reliability and faster delivery in the construction realm.
According to Jim Whittaker, Engineering Services Lead at JLL, the COVID-19 pandemic is accelerating adoption, particularly in the built environment, where it’s now critical for building owners to rethink how their properties are used and managed.
“Objective and credible data has always been needed to make decisions on property portfolios and inform investment decisions,” he explains. “But, agile, scalable, and dynamic workplaces are needed now more than ever. Digital twins support these requirements by providing the data and visualizations needed to make more rapid and flexible decisions.”
Since the onset of the COVID-19 pandemic, the real estate sector worldwide is stepping up its response to climate change and sustainable development.
At the same time, there is an increasing awareness of the environmental impact of real estate: the World Green Building Council suggests that buildings are responsible for upwards of 40% of the world’s greenhouse gas emissions. Investors, occupiers and real estate companies all have an equal responsibility to support and drive sustainable development.
With an aim to create a consistent agenda and definition, the World Green Building council in 2016 set up the Advancing Net Zero campaign. Since then, it has gained enough momentum and has come to influence actions of all stakeholders including governments, city councils, property owners, investors and occupiers alike.
New buildings are readily adopting low or zero carbon-heating solutions; however, the challenge will be retrofitting older buildings as this may require updating traditional energy systems, as well as changing internal layouts and facades.
Achieving net zero, both in operations and construction, will mean re-thinking the way we approach design and construction and introduce circularity in the planning phase because much of the future performance of a building is dictated by early decisions.
Designs that use fewer material and recycle steel and concrete where possible, positively impacts embodied carbon of a building.
Ultimately, the industry will need to recognize net zero not as a label but as a process that demonstrates the performance of a building maintained at net zero.
Thus, moving from a compliance focused to a performance-focused approach will become the key step in advancing the net zero agenda.
At JLL, we understand that a systemic response to sustainable development requires that change be introduced not only at building performance level but also across all levels of an organization, which is why our sustainability program touches not only on climate or on economic impact, but also on social impact of our assets.
Apart from measuring embodied carbon, incorporating circular economy principles and identifying investment impacts, we also recognize the link between buildings and employee well-being as a core principle of sustainable development and employ all four when we work with our clients on their sustainability and net zero journeys.
Uncovering and truthfully communicating how the buildings are really functioning is the starting point of this journey. It goes unsaid that future technologies, research and innovation will all play their role but we already have tools and solutions like integrated building analytics that help us uncover as to how optimally our buildings are operating now.
We exploit the potential of big data and new analytical approaches to enable more agile, efficient and evidence based decision-making to help our clients prioritise investment, implement practical solutions and ultimately reduce climate impacts.
Thinking of the future impact of this pandemic on office buildings, it may have already dawned on many of us that a majority of potential long-term trends and health measures will become permanent work-life features in the times to come.
Categories
Why 5G is racing ahead in Asia
Asia Pacific is leading the charge for the next generation of mobile connectivity. Major cities across the region are rolling out 5G networks this year, which are poised to reshape connectivity and big data with blazing-fast download speeds.
Hong Kong, Seoul, Sydney, Taipei, Manila, Tokyo and Shenzhen have already introduced 5G networks. In May, Bangkok became the first city in Southeast Asia to roll out a 5G network, while Singapore in August started a six-month trial.
“With more than half of the world’s Internet users situated in Asia Pacific – a majority of whom only use mobile devices – it is highly likely that most of tomorrow’s digital tools will come from the region and be shaped by the population’s mobile-first habits”.
Jordan Kostelac, director of proptech, JLL Asia Pacific
With 1.14 billion subscribers, Asia Pacific is the largest region for 5G adoption. It could account for almost 65 percent of global 5G subscriptions by 2024, according to technology analyst GlobalData.
Governments and businesses are keen to take advantage of 5G technology. High-speed connectivity, reduced latency and greater reliability open up the potential for more widespread digitalisation of industries and allow businesses better access to the benefits of the internet of things (IoT), artificial intelligence and big data.
“In previous generations of wireless internet, download speeds were the focus because information was largely stored on individual devices,” says Kostelac. “Cloud computing has shifted this requirement to focus on more upstream bandwidth. With greater capacity, 5G networks allow exponentially more data to be collected and organised to train AI and automate more of everything humans do.”
The impact on cities
For real estate, 5G technology is among the last pieces of the jigsaw in digitalising the built environment from mere concrete to behave more like computers, says Lou Chen, Senior Director of Research, JLL China.
“Buildings present the potential to generate massive amounts of data collected from sensors to allow for real-time monitoring, machine learning and predictive applications,” she says. “These in turn will drive buildings to be more efficient with the ability to create personalised end-user experience.”
Going beyond commercial buildings, 5G would enable IoT to be applied on a city-wide scale for more responsive homes and streets. Think automatic street lamps that light up when they sense people, or voice-controlled services for assisted living facilities.
“By using sensors, networks and applications, building owners, managers, and city authorities can gather real-time data needed to make decisions towards achieving the overall objective,” says Lou.
A survey of 150 proptech companies and 80 real estate firms in China showed that 47 percent of them plan to increase their proptech budget by up to 30 percent in the next two years, up from just over 30 percent of respondents to a 2018 poll, according to JLL.
The COVID-19 outbreak has only served to accelerate the application of 5G.
Pushing the boundaries
China, first to feel the impact of the virus, put the technology to use.
During the height of the crisis in the country, a field hospital in Wuhan used 5G thermometers to screen visitors for fever while patients were equipped with smart bracelets that allowed medical staff to monitor their vital signs through a central platform.
The first Affiliated Hospital of Kunming Medical University in Yunnan province partnered with China Mobile to launch a 5G-based online platform to provide free COVID-19 diagnosis and treatment.
In logistics, China’s smart 5G powered warehouses allow for goods to be sorted around the clock by robotic arms and limited human involvement.
“In the wake on COVID-19, there will…
Hastily enacted regulations addressing a fast-unfolding pandemic have introduced a layer of complexity around leases between tenants and landlords.
Governments worldwide have implemented a range of emergency legal and fiscal policies to help cushion the economic damage caused by COVID-19 travel restrictions and stay-home measures.
Each jurisdiction has established its own rules, resulting in myriad policies around returning to work, rent relief and codes of conduct for payment forbearance, and for helping tenants or property owners get access to government grants and loans.
“Many of these relate in some way to either direct fiscal support or regulatory suspension of the standard legal requirements around the tenant-landlord relationship,” says Jeremy Kelly, a director in JLL Global Research.
In Singapore, for instance, the government has granted tax rebates and cash grants to landlords whose SME tenants have seen their gross income between April and June fall more than 35 percent.
In the UK, businesses in the retail, hospitality and leisure sectors are able to obtain a cash grant of up to £25,000 ($32,000) per property.
In Australia, landlords get a 25 per cent reduction in land tax liability for 2019-2020, provided this is passed on to tenants. A
cross the developed world, moratoriums on the forfeiture of commercial leases by landlords for non-payment of rent are also common.
Many of these measures are tenant-friendly. Given the current soft market conditions, tenants are arguably in a stronger negotiating position in many markets, says Kelly.
This has led to some concerns about the position of landlords. One of the issues raised by the various measures introduced to support companies through the crisis is that they have frequently involved direct financial support to tenants, or a prohibition on landlord enforcement mechanisms for collecting rent.
Risk of unintended impacts
While some countries, such as Australia, the Netherlands and Singapore, have implemented plans to help landlords, in other regions the measures have not involved commensurate support for landlords, says Kelly. “A key distinction between countries thus far has been their acknowledgement, or not, that property is embedded in a larger economic and social system.”
In advanced economies, property developers and owners are not only a significant source of government tax revenue, but they are also investors in local infrastructure and services and providers of pension benefits and jobs. Unintended financial impacts on property owners, therefore, risk much more wide-ranging effects on local communities, companies and the broader economy, says Kelly.
Nevertheless, governments’ legislative efforts in mitigating COVID-led impacts have introduced uncertainty into lease relationships. Some landlords have opted to provide rental holidays for a fixed period. Others are looking to build in repayment schedules over the remainder of a lease, while some have forgiven lease obligations entirely, particularly for smaller tenants.
“These legal changes have necessitated negotiations on how rent obligations accrued during moratorium periods will be repaid,” says Kelly.
The negotiations are dependent on the circumstances of each landlord and tenant, with landlords attempting to strike a balance between maintaining earnings and supporting tenants through the crisis period to sustain occupancy levels and income over the longer term, he said.
Real estate as part of the broader economy
As many countries struggle to contain COVID-19, the scale and scope of the changes to leases are still unfolding. This…
The global Covid-19 outbreak has had serious negative effects on commercial real estate, including flexible space. Of late, many operators have experienced the flexible nature of the business working against them, as many occupiers have opted to surrender desks and implement work-from-home plans.
This is particularly true of freelancers, start-ups and SMEs.
Demand from corporate occupiers has been more mixed. Generally, flexible space with open plan and dense centre layouts is viewed as a higher risk. But in some markets, corporates have taken additional flexible space to satisfy business continuity and disaster recovery requirements.
As corporates return to the workplace, we expect to see them continue to leverage flexible space for these purposes, as well as for split teams and de-densification requirements. Thus, companies enable their employees to work remotely in better connected and more productive workspaces compared to home.
Landlords re-think flexible space strategy
Despite varied market conditions and end-user demand across the region, the Covid-19 outbreak has put some operators under financial strain, and we expect the consolidation of a heavily fragmented sector to accelerate as a result.
This is particularly true of operators on a straight lease, rent arbitrage model who are paying top of market rents.
In the wake of operator defaults, landlords will be forced to re-evaluate the role of flexible space in their portfolios.
But we do expect them to continue using flexible space as a tool to attract and retain traditional occupiers in their buildings. Greater China may offer some insight into how landlords will respond to centre closures as operators there were making strategic adjustments to their portfolios well before the outbreak.
Surrendered space can be re-purposed and leased as fully fitted-out, turnkey space to traditional tenants. However, given current market conditions, corporates’ wait-and-see attitude and desire to avoid capex, landlords may find it difficult to backfill vacancies with traditional occupiers.
Some landlords may attempt to operate centres themselves. But landlords should be aware of potential pitfalls – flexible space is a high-touch, high-service level business which most landlords are not set up to operate. However, a few have experienced some success although it has been difficult to compete with the professionalism and service levels of experienced operators.
A third option is to bring in a new operator. When choosing this path, landlords should be mindful of the operator’s reputation – even before the outbreak, corporate end users exhibited a clear preference for operators with a stable and profitable track record.
Long-term future of flexible space remains bright
The same fundamental demand drivers that brought about the recent structural shift in occupier markets remain intact, if not reinforced, and we believe the sector will resume growing. However, we do expect to see landlord-operator agreements evolve with…