EY's Seng Leong joins panel of judges at Real Estate Asia Awards

He believes the two major sectors that will drive the real estate industry is the reversal of urbanisation due to COVID-19 and the growth of India and China's middle class.

Seng Leong is currently a strategy and transaction partner at Ernst & Young (EY) and Global and ASEAN Real Estate, Hospitality and Construction M&A leader. He has been with EY Singapore for more than 18 years, and spent three years with the EY Transaction Advisory Services group in New York.

He has also worked in Asia and focused his expertise in real estate funds and limited partnerships. He has also provided lead advisory as well as restructuring and transaction advisory support on the investments or divestments of developers.

Real Estate Asia Awards is honoured to have that enormous breadth of knowledge and experience sit down as part of its judging panel in 2021. Seng Leong was also able to share some of his expertise in this exclusive interview.

What do you think is the most important factor when judging real estate developments for the Real Estate Asia Awards?

The most important factors when judging will be the degree of innovation and how fast the real estate players are responding to disruptions brought about by the accelerated digital changes and shifts in consumer behaviours as a result of the pandemic. No one can anticipate the changes brought about by the pandemic, but the response to it will be key.

What can the real estate industry learn from the COVID-19 crisis? And for those who have been badly hit, what can owners do to jumpstart their recovery?

The COVID-19 pandemic has varied impacts on different assets and importantly, companies must be mindful of the acceleration of digital disruptions. Changing consumer behaviour to shop online has hastened digital penetration and online shopping from 10% to 40% in the next three years in Singapore; whilst in Korea, online shopping penetration is already at 40% in 2020. Hence, warehouse is, and will continue to be, the “new retail” asset class. Retail assets focused on essentials or groceries will continue to appeal and provide opportunistic investment given the negative outlook on this sector.

As well, we are seeing changes to the future of work where flexible work arrangements will increase with 40%-50% of work to be performed from home. Going forward, there is still a need for commercial real estate but the purpose of office will change. With an increase in WFH, we expect growth of commercial offices to be cautious.

Amid social distancing requirements and travel restrictions, we will see pent-up demand in hospitality but recovery to pre-COVID-19 levels will take two to three years, based on IATA forecast. Countries with larger-sized domestic tourism will be the first to benefit from leisure tourism, as business travel will take more time for recovery for corporations that have become familiar with working and collaborating remotely.

What are the challenges and opportunities in the real estate industry today?

Space-as-a-service within real estate business will remain as core value drivers, but the ability to activate the space — be it commercial, retail, hospitality and large mixed-use developments will be important. Real estate industry players will need to work closer to activate the space that they own. This will be difficult as it is no longer about the ability to buy land but the ability to manage people who can collaborate and innovate the space owned by developers.

Which trends do you think will define the real estate industry in the years to come?

In the mid term, the focus areas that will impact the real estate sector will be digital disruption; heightened nationalism and reshaping of trade between US and China; and emergence of new asset classes such as data centres, telecommunication towers, and self-storage spaces. In the long term, climate change and the move towards sustainable developments may lead to a focus on green buildings and assets with lower carbon footprint. As well, the reversal of urbanisation due to the pandemic, and the emergence of India and China as the greatest source of middle-class growth that brings wealth and aspirations to own real estate, will also drive growth in the sector.

Do you think technology has an enormous potential to disrupt the real estate industry in a significant way? If yes, what steps could be taken to lessen its negative impact?

There are opportunities for real estate players to leverage technology to disrupt the sector, and use cases have included using big data and analytics for insights to better meet customer demands, and blockchain for tokenisation of real estate ownerships. The retail and hospitality sector already saw the need to pivot because relationships with consumers are already supplanted by the e-commerce players. Many retailers need to reinvent their business model rather than purely relying on offline sales.

What do you think is the future of real estate in Asia and the world?

The real estate sector in Asia will continue to benefit from the growth of India and China as the greatest source of middle-class wealth. As such, real estate developers need to be aware of the changing consumer behaviours in these key markets as the source of wealth that will drive trade intra-Asia.

Asian developers have historically focused on mixed-use developments, and this strategy remains useful in a post-pandemic world as it creates a moat when some of the businesses (e.g., retail or hospitality) within the developments face disruptions.