Asian real estate outlook 'optimistic' on Covid-19 recovery in 2021: report

OCBC stock watchers have taken a "decidedly optimistic" outlook on Asian real estate investments, citing "undemanding valuations" and recovery from the Covid-19 downturn.

The global roll-out of vaccines against the novel coronavirus is expected to gradually lift footfall and tenant sales in shopping malls, while more workers will return to offices.

"Meanwhile, logistics and data centres will continue to benefit from the tailwinds of higher e-commerce penetration rates and widespread adoption of technology - secular growth trends that have only accelerated with the pandemic," the OCBC report said.

In Indonesia, the OCBC Investment Research team pointed to "solid" pre-sales at major Indonesian developers in Q4 2020.

Bumi Serpong, Ciputra Development, Pakuwon Jati and Summarecon Agung posted a combined 5.1 trillion rupiah (S$485.1 million) in pre-sales in the last three months of the year, marking year-on-year growth of 14 per cent for the quarter.

Taking into account the second-quarter trough from the worst of the Covid-19 pandemic, pre-sales lost 11 per cent overall, to 16.3 trillion rupiah.

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But Summarecon, Pakuwon and Bumi Serpong have all guided for pre-sales increases in 2021, the analysts noted.

Over in Singapore, the OCBC report suggested that the expansion of Chinese tech giants "could also alleviate some pressure from the consolidation of office spaces by companies amid the 'work from home' trend".

"Singapore's data centre market will continue to benefit from healthy demand and supply dynamics," the analysts added.

Still, Singapore rentals are expected to remain largely subdued this year, the Ministry of Trade and Industry said separately, in another report on Monday.

To be sure, office rentals are expected to see a "modest recovery" as demand improves and the incoming supply moderates to 160,000 gross square metres (sq m) - lower than the annual average of 210,000 gross sq m completed between 2015 and 2020.

In terms of industrial space, an improvement in demand is likely to be offset by 2.7 million gross sq m of factories, business parks and warehouses slated to be completed this year - resulting in "broadly stable" industrial rentals.

Meanwhile, demand for retail space should remain sluggish for now, and subdued for the year overall, owing to the increased popularity of e-commerce, ongoing safe distancing measures, and the weak recovery in tourist demand.

The supply of retail space is expected to moderate in 2021 to about 90,000 gross sq m from the annual average of 170,000 gross sq m between 2015 and 2020.

Ultimately, the OCBC analysts warned: "The path to normalcy is likely to be uneven and bumpy, and the pace of the economic recovery will largely depend on how fast Covid-19 vaccinations are rolled out globally.

"We would thus look for real estate players with strong balance sheets that are well-positioned to ride out this period of uncertainty."