How investors, landlords can unlock US$15.3b worth of value stuck in ageing properties

Half of the properties in APAC prime locations is over 20 years old.

Investors and landlords across Asia Pacific are leaving billions of dollars on the table as their assets age and drift towards obsolescence. Offices, shopping malls and residential buildings in prime locations are losing their relevance as end-user behaviours and preferences change. Net operating incomes are reduced by inefficient infrastructure and high operating costs. Rental rates for aged and/or outdated buildings, are as much as 60% lower than for up-to-date well-managed properties in similar locations. Additionally, these buildings’ energy and maintenance systems are often less efficient, leading to increased operating costs. 

JLL research estimates that 50% of investment property in prime locations across the region is over 20 years old and that $15.3 billion (USD) worth of value is tied up in aging/underperforming property. Landlords and investors are missing out on income opportunities and cost savings as well as asset value. 

Here’s more from JLL:

Multiple business and lifestyle trends are driving buildings to become outdated and even obsolete; the growth of e-commerce, the rise of co-working and flexspace, and evolving consumer demands are just a few. COVID-19 pressures such as working from home, same-day food and product delivery, and social distancing have accelerated the impact of some of these trends. And the pandemic may act as a decelerator for other trends, such as dense urbanization. Troubled market conditions and future uncertainties also bring the importance of cashflow for landlords and investors into focus

With COVID-19 changing end user expectations and market dynamics, now is the time to enhance aging buildings. Take a fresh look at the use and configuration of space. With the right strategy and approach, value can be unlocked with enhancements ranging from largely cosmetic improvements through to extensive upgrades and even repositioning/repurposing. 

This requires a multi-faceted approach, spanning best practice, physical upgrades, new technology and improvements in building operations. Do this systematically and partner with experienced professionals with a full range of property market and management expertise to ensure you follow a best practice approach resulting in an optimised solution. 

Staying up to date with important trends, new value drivers and enhancement strategies in the relevant real estate class is key to increase asset performance and value. 

This could mean updating ageing office space to accommodate new modes of working such as flexspace, tenant demands for wellness amenities and new ways of charging. Demands for residential are also evolving, opening opportunities for mixeduse developments, co-living, senior living, student housing, work from home and other lifestyle trends. 

Retail is changing fast, responding to the rise of e-commerce, with implications for the size and use of space and opening up new models of charging. The tenant mix is evolving, with more F&B and experiential retail. Industrial real estate is also a clear growth area, with warehousing and logistics evolving to meet the demands of last-mile e-commerce, same day delivery and increased levels of robotics, automation and increased sustainability targets. And the concept and valuation of hotels are changing. Looking past the impact of COVID-19 on tourism, it’s time to explore yields if they are converted to co-living or serviced apartments. 

Get the full guide here.