Over $40B of untapped value tied up in under-utilized Asia Pacific properties
Many old districts in Manila have been benefiting from the rise of modern mixed-use centers and residential condominium buildings that have redefined the city skyline.
Real estate investors and landlords are missing income opportunities and cost savings as their assets age in Asia Pacific, according to JLL. Half of investment properties in prime locations in Asia Pacific are over 20 years old, leading JLL to forecast that there is over $40 billion worth of unrealized value in aging and underperforming properties regionally.
Without asset enhancement, offices, shopping malls, hotels, residential buildings and industrial facilities will lose relevance due to evolving habits and preferences, according to the “Unlocking Value in Real Estate” report.
JLL’s research showed that rental rates for aged, outdated buildings are 10 to 40 percent lower than up-to-date, well-managed properties in similar locations. These buildings’ energy and maintenance systems are often less efficient, leading to increased operating costs.
“With COVID-19 changing market dynamics and tenant expectations, many existing buildings no longer yield the same value as before the pandemic,” said Andrew Macpherson, head of asset development, JLL Asia Pacific. “To stay relevant, attract tenants and meet their evolving demands, landlords and investors alike are increasingly aware of the need to enhance their built assets, ranging from design improvements to extensive upgrades, and even repositioning or repurposing the entire property.”
JLL has identified five sectors that present the most potential for asset enhancement.
Office. Workplaces should be able to accommodate new modes of working such as safe and flexible spaces, wellness amenities and new ways of charging leases.
Retail. Malls must move fast amid the rise of e-commerce. Tenant mix is also changing with more F&B and experiential retail features coming into play.
Industrial. Warehousing and logistics are evolving to cater to the demands of same day delivery and increased levels of robotics and automation. The future deployment of electric vehicles and drones will have significant impact on the bricks-and-mortar element of the logistics sector.
Hotels. Certain older properties are being converted and repurposed to co-living or serviced apartments, and other hotels are adopting proptech more quickly for operational efficiency.
Residential. There are opportunities to develop co-living, senior living, student housing and mixed-use developments, while incorporating work-from-home and other lifestyle trends.
JLL said the key challenge that investors and building owners now face is how to define and implement the right scope of enhancement to deliver the best returns over a specific investment time period.
