Over US$40 billion of untapped value tied up in under-utilized Asia Pacific properties

Real estate investors and landlords are missing income opportunities and cost savings as their assets age in Asia Pacific, says JLL (NYSE: JLL). Half of investment properties in prime locations in Asia Pacific are over 20 years old, leading the real estate firm to forecast that there is over US$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 end-user habits and preferences, according to the firm’s latest ‘Unlocking Value in Real Estate’ report.

JLL’s research reveals that rental rates for aged and outdated buildings are between 10% to 40% lower than up-to-date, well-managed properties in similar locations.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, making a strong case for investors and landlords to reconsider design and asset enhancement strategies for aging properties.

“With COVID-19 changing market dynamics and tenant expectations, many existing buildings no longer yield the same value as before the pandemic,” says 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.”

Driven by the accelerated demands for health and wellness features, enhanced human experience, sustainability and technology tools following the pandemic, 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 for leases.
• Retail – malls must move fast in response to the rise of e-commerce, with implications for the size and use of space. The 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, automation and increased sustainability targets. The future deployment of electric vehicles and drones will also have a 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 says 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.

“We believe that staying up to date with market trends, keeping an eye on the impact of innovation, coupled with the extensive use of data, benchmarking and analytics will enable investors to identify the optimal enhancement strategy, resulting in an increase in asset performance and value,” says Calum Swinnerton, JLL Philippines’ Head of Project and Development Services.

“With JLL Philippines’ extensive market understanding, we are eager to work closely with investors and building owners on enhancement or repurposing opportunities,” he concludes.

JLL regularly holds knowledge-sharing events and publishes thought leadership pieces on the latest trends and insights in the real estate market. To know more, follow JLL’s social media pages on Facebook and LinkedIn.

JLL has been operating in the Philippines since 1997 as a 100% wholly owned entity and currently manages about 5.3 million square meters of real estate with a workforce of over 1,400 employees. With more than two decades of local expertise working hand-in-hand with its global legacy, JLL provides to the Philippine real estate market an unparalleled synergy of services with a strong commitment to achieve real estate ambitions through future-ready approaches. For further information, visit www.jll.com.ph.