Property players should aim to diversify amid volatility: panel

Singapore

TRADE wars, Brexit, local cooling measures and rising interest rates... as an uncertain outlook looms on many fronts, what's an Asian real estate player to do?

Manage that volatility by taking smaller bets, said Frank Khoo, the group chief investment officer of property giant City Developments Limited (CDL).

"My view is you need to diversify, to help you spread out your volatility. Rather than take big bets or not invest at all, you have to take smaller bets, and I think deal selection becomes even more important... You have to invest smaller."

He was speaking at the Asia Pacific Real Estate Association's (APREA) Asia Pacific Real Estate Outlook event, held on Thursday at Republic Plaza's Tower Club. Mr Khoo and his fellow panellists spoke on the themes of overseas investment and alternative asset classes.

CDL is looking at some alternative asset spaces such as senior housing and the PRS/ multi-family sectors - essentially, those that have a component of CDL's strengths in the residential and hospitality sector.

Mr Khoo added: "There are certain asset classes we may like but we may not have the operating expertise."

Observing that the age of growth by cap rate compression is over, he said it was important for real estate firms to value-add. "All the asset classes that are in favour today are in alternative spaces. But you can't buy it and just neglect it," he said.

Asked about CapitaLand's recent acquisition of Ascendas-Singbridge by moderator and APREA's Singapore chairman Andy Tan, Mr Khoo said that "big is going to get bigger" and CDL is looking at "platform opportunities as well , rather than just assets".

Ng Chiang Wei, Allianz Real Estate's head of portfolio management for Asia, counted student housing as an attractive play.

He said: "We're very interested in going into multi-family, China and Japan, but infrastructure and healthcare is not something we'd do."

Allianz is also largely not bullish on retail.

Yeow Chee Keong, real estate and hospitality leader for PwC Singapore, said: "Some of the bigger funds are moving into the US and Europe because they are seeing more opportunities in data centres and student accommodation."

Depending on the eye of the beholder, the ongoing uncertainty over Brexit could spell risk or opportunity.

Ian Loh, executive director and head of investment & capital markets at Knight Frank Singapore, said: "Some Singapore-based investors are taking the position that it's going to be all right, but a lot more are choosing to take a wait-and-see attitude."

Still, Singaporean groups are taking a keen interest in UK offices, business parks, logistics, student hosuing, he said. Other overseas markets of interest include Japan, due to "more stable returns". Mr Loh added: "With interest rates rising, people are seeking higher return or value-add opportunity, and anything non-residential in Singapore is still of interest."

Panellists had mixed views on the effect of the US-China trade war. Glyn Nelson, head of research-Asia Pacific for AEW, said the trade war is "troubling" and is likely to shave off some global economic growth this year, though his channel checks of leasing demand in Tier 1 cities did not show a direct impact isolated to the trade war.

Allianz, as a long-term investor, can ride through cycles, and so is not so concerned with how the trade war plays out, said Mr Ng.