The imperative to evolve

IN an age of the mobile, shared economy and Airbnb, what room is there for serviced apartments - those amenities-enhanced residences for longer-staying expatriates?

Choe Peng Sum, chief executive of Frasers Hospitality, has his feelers out for the ways in which the executive travel market has and continues to evolve.

Over the past few years, he has, for instance, identified a market he calls "road warriors", executives in developed markets who travel to do a job, typically without a family in tow. Stays have shortened significantly, obviating the need for larger two- or three-bedroom units.

Then there is the millennial market, younger travellers who seek an experience, want value for money and are less brand-loyal. "It will be foolish to keep using a formula when the market is changing. To ignore it, we'd be a dinosaur and die," says Mr Choe.

Frasers has honed its offerings through the years, enhancing its properties. Modena by Fraser, for instance, offers free high-speed Internet, cafes with "grab and go" convenience and features that integrate work and fun. In 2015, it acquired distinctive lifestyle hotels, Malmaison and Hotel du Vin in the UK, which it aims to take to Asia. A new Capri by Fraser will open in 2019 at China Square Central, which combines the facilities of a smart hotel with the amenities of a serviced apartment such as a kitchenette.

This edition carries a theme that is close to Singaporeans' hearts - real estate. The collective sale fever has pushed the total value of deals up to May 10 this year to over S$8.2 billion, higher than last year's S$8.13 billion. While sentiment has seen an uptick, the big question is the medium-term outlook and the sustainability of recent price gains in private property.

In our roundtable panel, Christine Sun of OrangeTee believes that while supply is likely to increase as a result of the collective sale frenzy, demand is likely to rise in tandem. Based on recent land sales, she expects good capital appreciation in areas such as Orchard Road and River Valley Road, among others.

CBRE's Joseph Tan expects interest to remain centred on prime residential areas, as those districts have declined the most since the last peak. High-end residential prices are currently about 2 per cent below the price levels four years ago.

In our Spotlight column, the focus is on real estate investment trusts (Reits). Reits delivered stellar returns in 2017 of about 28 per cent, but this year has been negative to date. The concerns are well known. One is interest rate risk, which would raise interest costs. Hence, the preference is for Reits with lower gearing and a greater proportion of fixed rate debt.

Overall, however, analysts are neutral on Reits, mainly on valuations. As at mid-May, the Reits sector was trading at a forward distribution yield of 6 per cent. The Singapore government 10-year bond yield has been trending up, and stood at 2.67 per cent. This brings the yield differential to about 333 basis points, compared to the five-year average of 410 basis points, according to Andy Wong, OCBC Investment Research analyst.

In the Legal Vantage column, Tan Ching Chern and Alex Toh of Withers KhattarWong helpfully compile a non-exhaustive list of issues that en bloc homeowners are likely to grapple with, such as tenancy agreements and mortgage redemption.

In the area of alternative investments, Rohit Hemnani of JLL Asia Pacific draws attention to real assets such as data centres and aged care facilities, which can help to diversify a real estate portfolio.

Elsewhere in this edition, Ay Wen Lie and Adam Sutton of PwC Singapore raise the intriguing question of trust in digital currencies in the Driving Disruption column. There are barriers to widespread adoption of cryptocurrencies, they write. To be accepted as a form of money, cryptocurrencies must be accepted as a medium of exchange and a reliable store of value. The rub is that currently no cryptocurrency is trusted sufficiently to be treated as such. There is, however, a path forward, although it may not satisfy today's converts.

Meanwhile, on a lighter note, Tara Loader Wilkinson profiles Revivo, a healing sanctuary in Nusa Dua, an Asian-led wellness resort that seeks to heal both body and mind. There is a global expansion plan for Revivo, taking it to France and even Rome.

We wish you a rewarding investment journey.

Genevieve Cua Wealth, Editor