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Emerging Trendsin Real Estate Asia Pacific 2020

ContentsEmerging Trends in Real Estate Asia Pacific 2020ivvi134677891012131416161819Executive SummaryNotice to ReadersChapter 1: Defying Gravity?Geopolitics: the Good, the Bad, and the UglyTrade Friction: Winners and LosersMore Caution, More CoreSpreading the LoadYields Begin to Rise . . . . . But Not EverywhereFocus on FXPockets of DistressSustainability: Coming of AgeCoworking: Does It Work?Retail: Is Asia Different?Focus on the End UserNervous about Niche?Accounting for Climate ChangeEmbracing Technology22242526262728293030313131Chapter 2: Real Estate Capital FlowsGlobal Funds Under-AllocatedJapan’s Slow-Motion ExodusFundraising SlowsDry Powder BuildsTighter Bank LendingNonbank Lending Picks Up . . . . . But Appetite Remains LowREITs on the RiseSingaporeJapanAustraliaIndia343547Chapter 3: Markets and Sectors to WatchTop Investment CitiesProperty Types in Perspective53IntervieweesA publication from:Emerging Trends in Real Estate Asia Pacific 2020 i

Editorial Leadership TeamEmerging Trends in Real Estate Asia Pacific 2020 ChairsPwC Advisers and Researchers by TerritoriesK.K. So, PwCAustraliaAndrew ClokeBianca BuckmanChelsea HancockChristian HolleDavid McDougallJames DunningJames McKenzieJane ReillyJosh CardwellLiz SteselMorgan HartNick AntonopoulosNita PrekaziRachel SmithRoss HamiltonScott HadfieldShannon DavisSue HorlinTony MassaroJohn Fitzgerald, Urban Land InstitutePrincipal AuthorsMark Cooper, Urban Land Institute ConsultantAlex Frew McMillan, Urban Land Institute ConsultantContributing EditorColin Galloway, Urban Land InstituteContributing ResearchersMichael Owen, Urban Land InstitutePauline Oh, Urban Land InstituteYusnita Baharuddin, Urban Land InstituteULI Editorial and Production StaffJames A. Mulligan, Senior EditorDavid James Rose, Managing Editor/Manuscript EditorMay Chow, Senior Vice President, Marketing andCommunications, Asia PacificLawreane Jamie de los Santos, DesignerMainland ChinaGang ChenG. Bin ZhaoHong Kong SARK.K. SoPaul WaltersDavid KanTaiwanJason LiuDavid TienBonnie HoEmerging Trends in Real Estate is a trademark of PwC and is registered in the United States and othercountries. All rights reserved.At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in157 countries with over 276,000 people who are committed to delivering quality in assurance, advisory, andtax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. 2019 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms,each of which is a separate legal entity. Please see www.pwc.com/structure for further details. November 2019 by PwC and the Urban Land Institute.Printed in Hong Kong. All rights reserved. No part of this book may be reproduced in any form or by anymeans, electronic or mechanical, including photocopying and recording, or by any information storage andretrieval system, without written permission of the publisher.Recommended bibliographic listing:PwC and the Urban Land Institute: Emerging Trends in Real Estate Asia Pacific 2020. Washington, D.C.:PwC and the Urban Land Institute, 2019.ISBN: 978-0-87420-442-1iiEmerging Trends in Real Estate Asia Pacific 2020IndiaAnish SanghviBhairav DalalDhiren ThakkarTanya TandonIndonesiaBrian ArnoldDavid WakeMargie MargaretJapanAkemi KitouEishin FunahashiHideo OhtaHiroshi TakagiKoichiro HirayamaRaymond KahnSoichiro SeriguchiTakashi YabutaniTakehisa HidaiTakeshi NagashimaTakeshi YamaguchiLuxembourgKees HageRobert CasteleinPhilippinesMalou LimSingaporeChee Keong YeowMagdelene ChuaMaan Huey Lim

Executive SummaryMore than a decade since the global financial crisis, Asia Pacific real estate continuesto produce strong returns. But as the clock ticks down towards the end of the currentcycle, caution is increasingly embedded into investor strategies.This despite the fact that there is no clear consensus as to whether the market is near,at, or beyond its peak. In part, this is because of the heterogeneous nature of localmarkets. As one Singaporean developer observed: “The risk of a market downturn hasincreased significantly, but it’s market specific.” In addition, markets and sectors acrossthe Asia Pacific are often at different stages of their own cycles. Singapore, for example,has only now rebounded from a slump that bottomed around three years ago, whileother markets have been riding the same wave after six years or more. Finally, witheconomic growth continuing at a reasonable clip, interest rates remaining at near-recordlows, and with ever-increasing amounts of capital circulating around the region lookingfor an investment home, it is hard to see where the catalyst for the next recession isgoing to come from. In the words of one private-equity investor: “If you compare whereAsia is today versus where the developed markets are, cyclically we feel like we’re in abetter position.”Survey Responses by Country/Territory30Percentage of %Nonetheless, caution is widespread,especially as yields begin to rise in somemarkets. Unusually, geopolitics hasbecome the new wildcard, with China-U.S.trade friction, protests in Hong Kong, andthe spat between Japan and South Koreacausing the most concern. Intervieweeshighlighted a handful of markets or sectorsthat look most vulnerable to localiseddownturns—mainland China, Hong KongSAR, and India—and these may offerbuying opportunities in the longer term.Nevertheless, sourcing deals remains ashard as ever, forcing investors to find otherways to get capital into the market. Some,for example, are turning to joint ventures,buying slices of larger assets that alsoallow them to spread their risk. Largerinvestors, meanwhile, are boosting theircommitment to core markets and, wherepossible, core assets, with Australia,Japan, and Singapore the most popular.An outlier, but a very popular one, isHo Chi Minh City—an emerging-marketgrowth hedge against more muted coremarket performance.The office sector remains the mostpopular asset class, although businessmodels in the fastest-growing componentof that sector—flexible workspace—areincreasingly being called into question.The industrial and logistics space,meanwhile, is still the sector most oftentipped for outperformance. While the AsiaPacific region is still undersupplied withmodern logistics space, more investorsare now seeking excess returns insubsectors of that market, such as coldstorage or last-mile warehouses.53.7%0AustraliaMainlandChinaHong : Emerging Trends in Real Estate Asia Pacific 2020 survey.*Includes New Zealand, Thailand, Malaysia, South Korea, United Kingdom, Germany, Belgium, Taiwan,Burma, United States, Russia, Indonesia, Vietnam, and Netherlands.ivEmerging Trends in Real Estate Asia Pacific 2020There is a growing perception that theretail sector in Asia has been oversold,with too many good assets penalised dueto problems surfacing elsewhere in theworld. Selective but sometimes largescale buying has been seen in severalmarkets, with investors now increasinglyfocused on adapting existing assets tomeet the changing demands of modernconsumers.Survey Responses by Geographic Scope of FirmOther focus1%Pan-Asia focusGlobal focus24%44%Focused primarily onone country/territory31%Source: Emerging Trends in Real Estate Asia Pacific 2020 survey.After years in the shadows, sustainabilityis now finally becoming a priority for theregion’s largest investors, and also manysmaller ones. Landlords have comearound to the view that incorporatingsustainable features into their buildingswill allow them both to cut running costsand increase rents as tenants becomemore willing to pay for space that acts as amagnet for talented staff.In terms of capital flows, cross-borderinvestment patterns into the Asia Pacificare being affected this year by the risingtide of antiglobalism in markets worldwide,with incoming capital from the UnitedStates and Europe down 28 per centyear-on-year in the second quarter of 2019to just US 2.54 billion—the lowest figuresince 2012. At the same time, however,the value of cross-border deals involvingmoney from within the Asia Pacific wasup 23 per cent year-on-year to US 7.76billion. This reflects the huge volume ofcapital held by regional institutions andsovereign funds that is outgrowing thecapacity of domestic markets to absorb.In China, local regulations have drasticallyrestricted outflows in 2019, but the slackhas been taken up by others, in particularSingapore and South Korea, whileoutflows from Japan are also picking upand can be expected to grow rapidly incoming years.The sheer weight of capital now incirculation means that competition toplace it in regional markets continuesunabated. One result of this is thatinvestment funds are holding increasingamounts of capital they are unable tospend. When they do spend it, however,financing for deals is for the most partreadily available (apart from in China andIndia, where the dynamics of domesticmarkets have seen banks retrench).Lending practices have been tightened toan extent, but for creditworthy investorsthere is no problem. As one HongKong–based advisor put it: “There’s nochange at the top. We see easy accessfor low-leveraged deals from goodquality sponsors.” With interest rates inthe second half of 2019 reversing courseto the downside, the overarching trendin terms of access to bank finance willprobably continue to be accommodative.Emerging Trends in Real Estate Asia Pacific 2020 v

Chapter 1: Defying Gravity?The first domestic Indian REIT listed in2019. Its shares were rapidly bid up invalue until by the end of 2019 its impliedyield had compressed to under 6 percent—a remarkably low level for a marketwhere risk is perceived to be high.This year’s investment prospect rankingsagain reflect investor preference forregional markets that are large, liquid, anddefensive—Singapore, Tokyo, Sydney, andMelbourne therefore figure strongly. Thisis partly a reflection of a flight-to-safetymentality resulting from growing concernsabout a global economic downturn. Inaddition, though, these are all marketsoffering significant numbers of core assetsthat are the preferred targets of regionalinstitutional investors that today constitutethe biggest driver of new demand forassets.in all areas. While placing significantamounts of capital in Vietnam remainsproblematic given the relatively small sizeof local markets and a general shortageof investment-grade assets, it is receivingstrong inflows of capital as a result ofincremental shifts of manufacturingcapacity away from China. Remarkably,Ho Chi Minh City this year, also rankedas the top city for all asset classes in thisyear’s buy/hold/sell tables.While investor sentiment towards localemerging markets is now on the wane dueto global economic concerns, Ho Chi MinhCity received consistently strong feedbackNotice to ReadersEmerging Trends in Real Estate Asia Pacific is a trends and forecast publication now in its 14th edition, and is one of the mosthighly regarded and widely read forecast reports in the real estate industry. Emerging Trends in Real Estate Asia Pacific 2020,undertaken jointly by PwC and the Urban Land Institute, provides an outlook on real estate investment and development trends,real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues throughout the AsiaPacific region.“We need to be a little bit more cautious in investing in APAC, particularly inareas of the economy that are going to be impacted by U.S.-China traderelations.”While investors across the Asia Pacificregion are notably more cautious aboutmarket prospects than in previous years,the jury remains out on whether the tophas been reached or breached. What’scertain, though, is that concerns todayare greater than ever. As one intervieweecommented: “I have been cautiouslyoptimistic for years—now I’m justcautious.” And as an investment managerin Australia noted: “For the past five or sixyears I’ve probably sounded like a brokenrecord, but it is a little bit different thisyear.”The biggest single factor, as cited byrespondents to our Asia Pacific survey,is the impact of the ongoing U.S.-Chinatrade friction, which is being felt across theregion as the Mainland economy slows.Emerging Trends in Real Estate Asia Pacific 2020 reflects the views of individuals who completed surveys or were interviewedas a part of the research process for this report. The views expressed herein, including all comments appearing in quotes, areobtained exclusively from these surveys and interviews and do not express the opinions of either PwC or ULI. Intervieweesand survey participants represent a wide range of industry experts, including investors, fund managers, developers, propertycompanies, lenders, brokers, advisers, and consultants. ULI and PwC researchers personally interviewed 94 individuals and surveyresponses were received from 463 individuals, whose company affiliations are broken down below.Throughout the publication, the views of interviewees and/or survey respondents have been presented as direct quotations from theparticipant without attribution to any particular participant. A list of the interview participants in this year’s study who chose to be identifiedappears at the end of this report, but it should be noted that all interviewees are given the option to remain anonymous regarding theirparticipation. In several cases, quotes contained herein were obtained from interviewees who are not listed. Readers are cautioned not toattempt to attribute any quote to a specific individual or company.To all who helped, the Urban Land Institute and PwC extend sincere thanks for sharing valuable time and expertise. Without theinvolvement of these many individuals, this report would not have been possible.Recent statistics add to the sense ofunease. Respondents’ expectations ofprofitability declined in this year’s surveyto an eight-year low, while data fromanalysts Real Capital Analytics (RCA)show a 20 per cent decline in year-onyear transaction volumes through the firsthalf of 2019, together with a fall in rollingExhibit 1-1 Asia Real Estate Transaction Volumes by Source of CapitalDomesticIntra-AsiaInvestment into Asia% Cross-border60%50%Investment into Asia (US billion)Private property owner or developer26%Real estate service firm (e.g., consulting, financial, legal, or property advisory)23%Fund/investment manager21%Homebuilder or residential developer10%Institutional equity investor 3%Bank lender or securitised lender 1%Other entities15%Emerging signs of a potential recessionin the U.S. economy have only added toconcerns. In a September 2019 report,analysts Oxford Economics stated: “Ofseven indicators that have been stronglyassociated with global recessions overthe last 45 years, only two are currentlysending recession signals. However, oneof these two—the U.S. yield curve—hasthe best predictive record and tends tosend the earliest warning.”40%30%% Cross-borderAsian REIT markets have reboundedin 2019, as interest rates in the UnitedStates began to decline. Many REITs inthe region, and especially in Singapore,are now on acquisition sprees to takeadvantage of the lower cost of capital fornew purchases, as well as an anticipatedupswing in investor interest in yieldbearing stocks, including in particular frominvestment funds, which have becomemore willing to buy into REITs as opposedto fixed assets.20%10%Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q3Q4 Q1 Q2 Q32012201320142015Q4 Q1 Q2 Q32016Q4 Q1 Q2 Q32017Q4 Q1 Q2 Q32018Q4 Q1Q20%2019Source: Real Capital Analytics.viEmerging Trends in Real Estate Asia Pacific 2020Emerging Trends in Real Estate Asia Pacific 20201

Chapter 1: Defying Gravity?12-month volumes from the record levelsseen in mid-2018. In both China andJapan, quarterly volumes fell to the lowestlevels in a decade, as both domestic andcross-border investment slumped.2018 H1 ’19Not all indicators are negative, however.Indeed, there seem to be few signs ofregional economic instability that mighttrigger a widespread downturn. Inflationis in check, financial systems appearwell capitalised, and global interest ratesremain at or near all-time lows.According to one fund manager: “Inmost asset classes, you have reasonablydecent operating fundamentals in termsof occupancy levels and demand. Thereis a limited amount of new supply,credit growth to the sector has beenreasonable, [and] lending standards fornew construction have been responsible.Those are all typically the areas thatwould precipitate some sort of cyclicaldownturn.”Other indicators are also supportive. Asone investor pointed out: “Real estate stillfeels like an attractive asset class vis-à-visbond yields and where interest rates are.”According to another, liquidity is also afactor: “We’ve been at the top now in Asiafor about five years, and every year we sitdown and say, ‘Well is this it, are we nowready for a correction?’ And then all thesepeople rock up with billions of dollars tospend on Asian property and of coursethey support values.”Meanwhile, DWS research projectsunlevered aggregate total returns for coreAsia Pacific real estate to range between5.5 per cent and 7.6 per cent annuallyfrom 2019 to 2023, well below the 2018figure of 10 per cent.MetroGrand Total ( m)122Tokyo33Seoul64Beijing 5,83945Sydney 5,7637567SingaporeShanghaiHong Kong SAR 9,719Emerging Trends in Real Estate Asia Pacific 2020–46%–19% 8,357–2%138%17% 4,884 4,57273%–2% 2,82188Melbourne109Osaka2110Shenzhen2611Tianjin 1,237912Brisbane 1,2171513Mumbai 1,0741114Taipei 6791315Yokohama 503Historically, real estate investors prefer tofocus on bottom-up rather than top-downmacroeconomic factors. Hence: “location,location, location” trumps “events, my dearboy, events.”% YOY 10,6371–14% 2,007165% 1,2571,233%295%–21%–23%–33%–56%Exhibit 1-3 Real Estate Firm Profitability TrendsExcellentGoodFair2006 2007 2008 2009 2010 20112012 2013 2014 2015 2016 2017Nonetheless, political upheaval hasbecome a common theme across theworld in 2019. U.S.-China trade frictionmay be the obvious harbinger of doom,but it is hardly the lone red flag. Japanand South Korea are also engaged in arenewed political spat, while a series ofstreet protests over a number of monthshave also flared up in Hong Kong,wreaking havoc on the city’s retail andhotel sectors.What are the consequences froma real estate point of view? Whileundoubtedly negative for the markets,the current dislocations are also creatingopportunities. In China, for example, thetrade friction has followed hard on theheels of an ongoing regulatory crackdownon alternative finance products as wellas a general tightening of credit imposedby the central bank. Interviewees basedin China warned that the malaise wasstarting to gain traction. In the words ofone private-equity investor, the economy“is getting hit harder than people outsideChina realise.”Source: Real Capital Analytics.Source: Emerging Trends in Real Estate Asia Pacific 2020 survey.2Geopolitics: the Good, theBad, and the UglyExhibit 1-2 Most Active Asia Pacific Metros H1’1920182019 2020As a result, for many multinationalcorporations (MNCs), expansion plansare now on hold. “They’re more treadingwater than anything else, which certainlyimpacts commercial office leasing,” oneChina investor said. However, “If you lookat the market as a whole, the growth storyis still very much about the tech sector,and Chinese tech firms are doing verywell. They are absorbing a lot of space.According to a different fund manager,“There is clearly an impact in theShanghai and Beijing markets. Shanghai,in particular, has recently had quite abit of office development – so you haveshrinking demand from MNCs nervousabout the trade friction at the same timeas a spike in supply. Having said that,the biggest occupiers in Shanghai aredomestic companies, and the refocusingof the economy from exports to domesticdemand–driven activities will mop upthat supply relatively quickly. So, therecould be a short window to buy.” RCAdata show Chinese transaction volumesfalling by 19 per cent year-on-year to 15billion in the first half of 2019, with a moredramatic 39 per cent fall in the secondquarter. Given that domestic players havebeen handicapped by restricted access tocapital, foreign buyers are now especiallyactive in the market.investment values. According to a locallybased investor who acts for a number oflarge institutions and sovereign wealthfunds, “A couple of the big sovereign fundscalled to ask if this is an opportunity, butI had to tell them, essentially, that no oneis selling. Apartment owners may panicsell, but you’re not going to see anythingon the commercial side. The sentiment iswait and see—if they don’t have to closea deal, they’re not going to close, butbasically, the Singaporeans and Koreanssee it as just a blip—no one is expectingcarnage.”Going forward, there was also aconsensus that Hong Kong is unlikely tosuffer an exodus of businesses to otherdestinations. In particular, the prospect ofHong Kong’s financial industry migratingto locations such as Singapore orShanghai is seen as unlikely due to thecontinuing advantages offered by HongKong’s reliable legal system, its low taxrate, and its proximity to mainland China.Given that the Mainland’s capital accountis unlikely to open up, Shanghai will remainunable to compete as a major finance hub.In Hong Kong, meanwhile, the impactof street protests has begun to be felt inearnest. Tourist arrivals were down 40per cent year-on-year in August, hotelswere on average only half full and, in theretail sector, one major landlord reportedsame-store sales down 50 to 90 per centover the same period. That said, the officesector has emerged largely unscathed.Although central business district (CBD)vacancies were up and rents were downmarginally, there has been little effect onExhibit 1-4 Most Problematic Issues for Real Estate InvestorsTrade wars6.64Low yields6.32Global economic growth6.12Asian economic growth6.00Lack of investable properties5.85Currency volatility5.84Competition from Asian buyers5.74Competition from global buyers5.22Cost of finance4.36Impending interest rate ematicSource: Emerging Trends in Real Estate Asia Pacific 2020 survey.Emerging Trends in Real Estate Asia Pacific 20203

Chapter 1: Defying Gravity?Singapore, meanwhile, is too far awayto be a major player, offers minimal costsavings compared with Hong Kong, andstruggles with a number of challengesof its own, including difficulties obtainingworking visas for staff.Still, with so much capital circulating in theregion, certain markets probably standto benefit. Little new capital is finding itsway to China, for example, which musttherefore be heading elsewhere. As onefund manager said: “I think at the margins,people hesitant to put money to work inmainland China and Hong Kong SAR willperhaps be even more focused on Tokyoand Australia. And maybe Singapore isalso a net beneficiary of what’s going onin China.”Trade Friction: Winners andLosersAnother way that trade friction is alteringregional investment patterns relates to themigration of manufacturing capacity outof China. This shift had been underwayfor several years, but tariff hikes havenow accelerated the process. While theamount of capacity leaving China is stillsmall relative to the total, even a minorshift in a market as big as China can havea major impact on the emerging-marketeconomies where most of the outgoingcapacity is now heading. So far, the primebeneficiaries have been South East Asianeconomies, although some countries havebenefitted more than others. Accordingto one interviewee: “Over the past year, ofthe 25 major industrial refugees that haveleft China, most have gone to Vietnam,Thailand, or Myanmar.” Indonesia hasso far seen little activity, and the sameapplies to the Philippines. This is because,although “they’ve been poking around,they’re very used to competing on taxincentives, and that’s where Vietnamtrumps the Philippines, despite having amore opaque legal contract system.”One result of this migration is that spacein emerging-market logistics and businessparks “has been selling like hot cakes”,as investors scramble to find a home fornew factories. Industrial real estate rentsrose by double digits year-on-year in thefirst half of 2019 in several Vietnameseprovinces, according to Savills research,including 54.6 per cent in Binh Duong and31.1 per cent in Tay Ninh, northwest ofHo Chi Minh City. With incoming foreigninvestment, meanwhile, rising 69.1 percent to US 16.74 billion in the first fivemonths of the year, Vietnam is now wellentrenched as the favoured China-plusone model.and metro, so the traffic is surmountable,and of course liquidity in Bangkok is thebest, in terms of buying and selling realestate generally. As companies becomemore fly-in fly-out, and as there’s a lotmore regionalism, a high-cost base likeSingapore, especially with its tighteningvisa requirements and high home prices,make places like Bangkok an interestingoption as a base.”Exhibit 1-5 Projected Change in Economic Factors, Next Three to Five YearsWorsenNo changeImproveGlobal economic growthConstruction costsAsian economic growthCompetition from Asian buyersYield compressionCost of financeAnother result is that Bangkok is nowfiguring increasingly as a candidate formultinationals’ regional headquarters.According to one executive activethroughout South East Asia, “Thailand isfeaturing more and more in people’s mindsjust because executives like being inBangkok. The quality of lifestyle productsfor their families is abundant, people havegotten used to commuting by the SkytrainAvailability of investable properties0%20%40%60%80%100%Source: Emerging Trends in Real Estate Asia Pacific 2020 survey.China: Key ThemesDespite a slowing economy, concernsover ongoing trade friction, and a tighterregulatory environment, more and moreoverseas investors are beating a pathto Chinese real estate markets. First-tiercities, and especially Shanghai, are todayregarded as gateway destinations wherethe largest global institutions feel theymust have a presence as they diversifytheir portfolios.Commercial real estate transactionvolumes in China hit a record high US 25billion in the first half of 2019, according toJLL. The results were driven by a bumperfirst quarter, with investment volumesrising 174 per cent year-on-year to someUS 17 billion. As usual, most activity wasfocused on Shanghai, which saw US 10.9billion of transactions, making it the fourthmost-liquid city in the world, behind onlyNew York, Tokyo, and Paris.4A few years ago, foreign investors oftenhad trouble landing deals in China’sprimary cities. Today, however, thenumber and size of such transactionshave increased significantly. “I think there’sbeen a dramatic shift over the last fewyears,” one investor said. “Historically,the Chinese [imposed] tight controls overforeign capital entering the market, andit was very difficult to compete againstthe locals. Clearly, as the economy hasstarted to slow, you have less aggressivedomestic capital and a weaker Chinesecurrency, but there is also a desire fromBeijing to see more foreign capital comeinto China.”A further boost for foreign investors hasbeen Beijing’s reluctance to slackenlending restrictions for domestic realestate buyers, even though someEmerging Trends in Real Estate Asia Pacific 2020loosening has been allowed for small andmedium-sized companies. “We’re stillseeing a very tight lending market towardsreal estate, [and] as of right now, I don’tsee that changing,” one developer said.The Chinese office sector has been theasset class hit hardest by the trade friction,although investors continue to selectivelytarget assets in the biggest destinations.According to one fund manager, “Weprefer to invest in the first-tier cities, wherewe tend to see higher levels of growth,greater levels of liquidity, and largeropportunities. Cities that have the mostinnovative companies, particularly orientedtowards the technology sector, are whereyou have the highest growth.The current regulatory environment,which has tightened access to capitalfor developers, investors, and consumerbuyers and introduced price controls forresidential properties in some cities, hasled some investors to take a cooler viewof China. However, the logistics sectorcontinues to be a favourite. According toone overseas investor: “We are looking atsome logistics deals in China. There’s stilla massive undersupply of good-qualitystock, and it’s hard to get the land. Ittakes years to line those deals up, butthey certainly seem to lease well andquickly once they’re built. There is massivedomestic growth in consumption, whichis supporting logistics, the trade warnotwithstanding.”A notable change in markets in first-tiercities has been requirements in publicland auctions insisting that buyers agreeto long-term ownership. For example, thebuyer of a mixed-use development sitewill be able to sell the residential elementas usual, but must continue to hold thecommercial part of the developmentfor 10 years or more after constructionis complete. This naturally makes lifedifficult for fund managers, unless they areinvesting in conjunction with a source oflong-term capital. As a result, “we’ve beenmoving to more brownfield, value-addprojects,” one fund manager said. “Therequirements on greenfield developmentare becoming onerous for anyoneinvesting via a fund.”growth prospects, but it is not likely toachieve the growth levels it has beenhistorically achieving. We are probablymore enthusiastic about areas or assetswithin the Chinese economy that facedomestic consumption.”Finally, a number of interviewees predictedthat the days of “easy growth” havealready ended in China. According to oneinvestor: “We still want to invest; however,we do have t

highly regarded and widely read forecast reports in the real estate industry. Emerging Trends in Real Estate Asia Pacific 2020, undertaken jointly by PwC and the Urban Land Institute, provides an outlook on real estate investment and development trends, real estate finance and capital mar

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