Archive for the ‘Asia Pacific’ Category

High Expectations From Workplace Productivity In India

Wednesday, October 9th, 2013

With workplace and worker productivity gaining increased attention from senior leadership around the globe, corporate real estate (CRE) executives in India are placing this objective as a key priority and are tackling it as an opportunity to create value.

Jones Lang LaSalle’s report, India Corporate Real Estate: On the Verge of Transformation, reveals that CRE executives in India are facing the highest productivity expectations as compared to their global peers. Indeed, 89% of them reported high expectations for workplace productivity outcomes, compared to 72% globally. Improving people and asset productivity is almost as highly expected (75% for both factors in India, compared to 61% and 47% globally).

Another sound bite around workplace perspectives at companies in India is that fewer are planning to add space in the next three years. Instead, most of them prefer to focus on workplace quality (78% in India versus 65% globally). If companies in India are hiring at the same time (the Team Lease Employment Outlook Survey [TeamLease Services Private Ltd is India’s largest and foremost people supply chain and HR services company] predicts high levels of optimism in terms of the hiring sentiment in India), occupation densities will automatically increase, as well as utilisation rates. It will be CRE’s role to make sure that worker experience is enhanced—or, at the very least, does not deteriorate—whilst density and utilisation peak.

These bullish findings, typical of India responses throughout the survey, are moderated by two facts. First, our sample base includes 78% of respondents from western MNCs operating in India. Second, a large proportion of respondents in India belong to large companies within the financial services and technology sectors, both of which traditionally put more emphasis on workplace and people productivity and set the standard for local and/or smaller companies.

Company expectations of productivity outcomes from CRE

Source : Jones Lang LaSalle, India Corporate Real Estate: On the Verge of Transformation, 2013

Question: What productivity outcomes is your organisation expecting the corporate real estate function to deliver?
(Those indicating high expectations)

Improving workplace quality and achieving high productivity expectations are not easy. A lack of investment capital is identified as the most limiting factor in driving workplace transformations by a majority of respondents in India and globally. The second inhibitor, complexity arising from cultural diversity, is more specific to India with its wide array of languages, religions and cultures. The incredibly diverse Indian workplace environment does require a special approach and strategy.

An established way to overcome this challenge is to collaborate with the other corporate functions. CRE teams in India-based companies are already ahead of many countries in working with IT, HR and finance to tackle common issues, although today, this happens mainly on an ad hoc, project basis. Taking the lead in instituting more permanent forms of collaborations, such as shared services types of partnerships, and establishing stronger relationships with the senior leadership is the way forward for CRE in India. By embracing a role of change agent acting in line with the overall business strategy, CRE leaders will be in a better position to fully realise the relevance of CRE and demonstrate its corporate value add.

About the author
Kateryna Kyryllova is a Manager in Jones Lang LaSalle’s Corporate Research team in Singapore.

The Next Big Move for Luxury

Monday, September 9th, 2013

Hong Kong is great for shopping with many international brands present in the market. One thing I do miss though is being able to walk into a department store and buy my favourite Aussie brands of clothes. So I’ve been happy to see that Australia is catching on to the online shopping phenomenon – which means that I can now go online in Hong Kong and for a small fee have my purchases shipped here.

A recent survey by the National Australia Bank estimated that online retail sales currently account for 6% of traditional bricks and mortar retailing in Australia. While still a small percentage, it’s likely to grow substantially in the years ahead as retailers and consumers alike warm to the idea and benefits of e-commerce. Interestingly, some of the “emerging” markets are leading the way in this area, with the most notable example being China. According to a recent study by Bain and Company, online retail in China has grown by more than 70% a year between 2009 and 2012 and this year China is expected to overtake the United States to become the world’s largest e-commerce market.

Across Asia Pacific, we’ve also seen many of the emerging retail markets transforming rapidly with the aggressive expansion of international retailers, not only in China but increasingly South East Asia (see last week’s blog on new retailers in the Philippines). In Australia, international retailers are making a somewhat belated entry into the market but are now stepping up the pace of their expansion plans. Australia is a small country in the scheme of things with a population of 23 million, but the average income of its residents is around eight times that of Shanghai.

For more insights on the latest trends in Asia Pacific’s retail sector, take a look at our recently released Retail Cities in Asia Pacific publication, The Next Big Move for Luxury.

Sources:
National Australia Bank (July 2013), NAB Online Retail Sales Index
Bain and Company (2013), China’s e-commerce prize

About the author
Dr Jane Murray is the Head of Research, Jones Lang LaSalle Asia Pacific.

The Rise Of Asian Retailers In The Philippines

Friday, September 6th, 2013

Historically, the Philippines retail market has been dominated by Western retailers, particularly by American brands, reflecting the Filipino consumers’ strong cultural affinity with the United States. This is evident from the long-standing presence of American retailers in major shopping centres throughout the country. From 2010 to 1H13, it can safely be estimated that the number of new international retailers in the Philippines is more than 50. Of this estimate, it is worth noting the relatively large number of new Asian retailers that have entered the country.

The table below lists some international brands that entered the country between 2010 and 1H13. While this is only a sample, a significant number of Asian retailers come from the Food & Beverage category. These retailers have also undertaken rapid store expansions as seen by the select Asian retailers outpacing their Western counterparts by nearly three times. The sustained store expansions by Asian brands coupled with their relatively large retail space requirements has contributed to the healthy take-up and stable rental growth of the local retail sector in recent years.

Select International Brands in the Philippines (2010-1H13)

Note: The list is not exhaustive.
Sources: Various retailers’ homepages, company disclosures and new articles, Jones Lang LaSalle Research

One of the key factors driving the growth of these Asian retailers in the country has been the positive performance of the Philippine economy amidst the weak global recovery. The country posted a robust 7.5% GDP growth rate in 1H13, leading the economic growth of the Asia Pacific region together with China and Indonesia. In the same period, the country has received investment grade credit ratings from various major international credit rating agencies which has further reinforced its strong economic position.

This positive economic performance is underpinned by healthy domestic demand due to the rising disposable income of many Filipino households. The higher household income can be attributed to the continued growth of overseas Filipino (OF) remittances and the local offshoring and outsourcing (O&O) industry. According to the latest Consumer Expectations Survey by the Bangko Sentral ng Pilipinas, around 95% of the OF households surveyed spent the remittances on food alone. This may partly explain the success and aggressive expansion of Asian food & beverage retailers in the country. Similarly, the sustained expansion of the O&O industry, which offers above average industry salary, has likewise helped raise the disposable income and purchasing power of the O&O workforce. As of end-2012, approximately 780,000 employees are employed by the industry according to the Information Technology and Business Processing Association of the Philippines.

As the Philippine growth prospects remain positive, we expect consumer appetite to remain healthy, supporting robust domestic demand that may drive the sustained entry and expansion of new and existing Asian retailers in the country.

About the author
Janlo de los Reyes is the Senior Research Analyst for Jones Lang LaSalle in the Philippines.

A Changing Perception – New Generation Chinese Companies Take A Strategic Approach To Facilities Management

Monday, September 2nd, 2013

In recent years, a new generation of young, dynamic and driven Chinese companies such as Tencent, Huawei, CICC and Lenovo have been in a constant race for market share both globally and in China. Now, as they look to further improve their on-going competitive advantage, more of these companies turn to their real estate portfolio, investing in facilities management (FM).

At the root of this is a change in perception of FM. In particular the more forward–thinking companies indicate they now look at FM as more of a strategic function from which they can gain a competitive edge against peers that are struggling with challenges such as accommodating headcount growth, attracting and retaining talent, boosting international credibility, and improving quality management and risk mitigation.

A maturing economy will drive the evolution of the IFM industry

It is evident that the implementation of Integrated Facilities Management (IFM), whether this is done in-house or outsourced, is picking up fast across China. In particular, Chinese multinationals are evolving rapidly, shifting toward IFM to improve operating efficiency, workplace utility, safety, employee comfort and overall experience.

However, at present, companies that implement IFM still account for just a small part of the market, with most Chinese (state-owned or formerly state-owned) enterprises deploying simple in-house and out-tasking models. As seen in mature markets globally, outsourcing practices are likely to drive evolution. However, in the short term, IFM consultancy is expected to be a more attractive concept for most Chinese companies as a reduction in staff numbers often remains very unattractive.

A developing industry, with some growing pains

There are also some considerable complications for companies seeking to operate their facilities according to international best practice standards. Mainly, the quality and consistency of services is affected by the shortage of qualified staff and high quality service providers, vendors and suppliers. For example, a major IT firm recently experienced issues at a chip manufacturing site. Specialists from Singapore had to be brought in to help run the maintenance of the clean room and wider facility equipment due to the lack of qualified vendors able to deliver locally. These and other hurdles will pose difficulties for Chinese companies and new market entrants alike

Nevertheless, the market conditions in China seem ripe for fostering the evolution of the IFM industry in China. There are many challenges and potential pitfalls ahead for those unfamiliar with the delivery of IFM services or the nuances of managing real estate in China. Those companies that take the time to understand both sides of the equation will be best placed to gain competitive advantage over their peers.

Read other findings in Jones Lang LaSalle’s report Integrated Facilities Management in the Middle Kingdom, which will be launched at the Shanghai IFM conference on 4 September.

About the author
Alex Colpaert is the Senior Research Manager for Jones Lang LaSalle’s Corporate Research team, based in Singapore.

Investment Activity Ahead Of Expectation

Tuesday, July 30th, 2013

Asia Pacific investment activity reached USD 59.7 billion in the first half of 2013, up 21% compared to the same time last year, coming in ahead of expectation. Growth is being driven by the larger markets in the region with Japan, Australia and China all performing well. Domestic groups, particularly the REITs have been active and are being supported by high interest coverage ratios, a lower cost of debt and new capital sources which has improved their competitive positioning and afforded them considerable dry powder for yield accretive acquisitions.

We also continue to witness a trend of offshore groups investing via separate accounts managed by global funds with capital being sourced from South Korea, US, Canada and the UAE.

Around the region, Japan surprised on the upside in 1H13, posting 50% growth to USD 10.2 billion. Renewed market confidence and stimulatory measures have supported J-REIT prices and investment activity as well as resurgence in IPO activity. Rents have shown some signs of early growth and are up 4.7% over the past year, the fastest growth rate since early 2008.

Australia continues to attract capital from both domestic and offshore groups, particularly via separate account funds and joint venture structures. A number of large deals were concluded during the quarter highlighting continued demand from both offshore and domestic institutional investors and pension funds, with cross border purchasers accounting for 25% of total acquisitions.

China’s capital markets bounced back to USD 6 billion from 3.6 billion in the first quarter. Despite macro concerns and the recent episode of interbank rate volatility, foreign buyers continued to execute, accounting for around 30% of overall deals. The markets in Hong Kong have suffered somewhat following cooling measures introduced by the government with investment volumes down 53% in 2Q13 to USD 1.5 billion. Singapore improved on 1Q13 by 21% to reach USD 2.3 billion. The market seems to have passed its cyclical trough with office rents recording growth for the first time since 2011. Improved market fundamentals and a number of large deals that are currently in advanced stages of negotiation should support investment volumes over the remainder of the year.

The outlook for the remainder of the year is positive and we remain optimistic in reaching our 2013 forecast of USD 110 billion.

About the author
Nicholas Wilson is a Research Manager of Asia Pacific Capital Markets for Jones Lang LaSalle in Singapore.

At The Crossroads

Wednesday, July 17th, 2013

In a post-GFC environment, many Corporate Real Estate (CRE) professionals find themselves at the crossroads. Having delivered up significant cost savings when demanded during the GFC, this new regime of cost efficiency is now accepted as business as usual. I don’t think anyone is under the illusion that cost savings are going to leave the boardrooms of corporate Australia. It is the new world order.

However, at the same time, the C-suite are asking CRE professionals to shift the focus onto value creation and asking them to deliver real estate strategies that drive the performance of the business. It seems that Australian CEOs are more demanding than their counterparts in other parts of the world.

Productivity is at the top of the list according to our Australian CRE Trends survey, with CRE executives asked to drive productivity at the asset, workplace, people and business levels. Facilitating remote and mobile working, transforming workplace quality and bringing more flexibility to the leased portfolio rounded out the top four.

The Changing Demands of Senior Leadership

Source : Jones Lang LaSalle’s Australian Corporate Real Estate Trends 2013

Interestingly only 30% of CRE executives in Australia felt well-equipped to meet all the demands of the C-suite. Metrics were a big part of being able to demonstrate the value-add. Only 22% of CRE professionals said they could extract metrics on demand at the facility level and only 20% at the portfolio level.

So how to deliver these strategic imperatives whilst at the same time remaining vigilant on cost savings? Our Australian survey identified four key strategies to do so – getting better aligned with the C-suite and other business enablement functions, driving a productivity agenda, breaking through the barriers to success and tackling big data.

Read more on how CRE professionals can deliver on both sides of the cost vs value equation in our Australian CRE Trends report.

About the author
Anna Town is a Director in Corporate Research based in Sydney.

The Turning Economic Tide

Friday, June 28th, 2013

Over the first half of 2013, we’ve seen some significant changes across Asia Pacific in terms of relative economic performance. The tide has started to turn in different directions for the region’s two biggest economies, China and Japan. China is slowing as its government looks to transition to a consumption-led growth model. Conversely, the government in Japan has succeeded in reigniting its economy after two decades of stagnation. Meanwhile, emerging South East Asia has come up steadily through the economic growth ranks, assisted by a variety of drivers including abundance of natural resources, competitive wages and policy reform.

  • Japan has grabbed much of the limelight in recent months following the huge stimulus program announced by Prime Minister Abe in April. The benefits are already starting to flow through to the real economy. The falling yen has boosted exports and at long last Japanese consumers are starting to spend again. Time will tell whether the positive impacts are permanent, but over the short term we expect to see a boost to the country’s property market. The combination of improving economic growth and cheaper yen-denominated assets should see increased purchases by international investors in what is already the region’s largest investment market.
  • South East Asia’s improved economic performance has been another regional highlight, with top marks to Indonesia for its resilient growth and to the Philippines for its 7.8% y-o-y expansion in Q1, the strongest in the region. Jakarta is now on the radar screen of international real estate investors, while Manila has been one of the few markets to enjoy continued strong leasing demand, much of it underpinned by MNC offshoring and outsourcing activity.
  • In Australia, the mining sector has come off the boil as China has slowed, contributing to the rapid fall of over 10% in the Aussie dollar over the last two months. A sustained currency depreciation will assist the competitiveness of Australia’s exporters including struggling manufacturers. In the property arena, Australia was already high on the list for international investors due to its attractive yields and excellent market transparency. Like Japan, a cheaper currency should help to stimulate further inward investment.
  • For an overview of the changing economic and property market landscape in Asia Pacific, take a look at our quarterly flagship publication, the AP Property Digest. If you need in-depth property market data and analysis, we offer tailored subscription packages for our industry leading Real Estate Intelligence Service. Our Q2 results are out shortly.

    About the author
    Dr Jane Murray is the Head of Research, Jones Lang LaSalle Asia Pacific.

    Shake Up Their Workplace!

    Monday, June 17th, 2013

    In increasingly competitive economies, the workplace is now seen as one of the crucial pieces for improving productivity.

    How productivity is being tackled is changing. If productivity is a function of ‘reducing inputs’ over ‘increasing outputs’, the first part of the equation is still often addressed first. For example, Australia resource giant BHP Billiton’s CEO Andrew Mackenzie recently pledged to “unlock more cash from [their] installed capacity by pulling the productivity lever very hard.” However, ways to increase outputs are now being paid a lot more attention. In particular, attracting and retaining the best talent and providing them with an environment where they will strive and grow (i.e. work efficiently and effectively) is recognised as a major competitive asset.

    At the same time, the productivity imperative is increasingly intermingled with sustainability considerations. This is the case at the Toyota Corporation, where one of the support functions is a Productivity & Environment Group of which the head reports to the CEO. In addition to a proven track record of cost savings (reduced energy expenditure, fewer sick leaves, etc.), the payback of green initiatives extends to boosting worker productivity. “Numerous studies have shown that employees enjoy work more and are more productive when they see their companies acting in a socially-responsible manner,” said Dan Probst, Global Chairman of Energy and Sustainability Services at Jones Lang LaSalle.

    In this context, corporate real estate (CRE) teams are mandated to participate more than ever to their overall organisation’s productivity endeavours. While enhancing the productivity of the real estate portfolio emerged in our 2011 report as a best-in-class companies feature, the findings of our Global Corporate Real Estate 2013 survey show this is now a high expectation across the board.

    C-suites are also awakening to the fact that, beyond the workplace, CRE decisions have the ability to improve people, business and asset productivity. Workplace transformation projects are an opportunity not to be missed to touch all four components in a coordinated, instead of isolated, manner. Close collaboration with other corporate functions will help CRE teams achieve optimum results.


    Source: Jones Lang LaSalle, Risks Ahead- Global Corporate Real Estate Trends 2013

    In Asia Pacific (APAC) there is clearly room for improvement. As many as “40% of employees feel there isn’t enough collaboration in their workplaces,” according to a Microsoft survey in APAC in 2013. While new workplace philosophies such as Activity Based Working are being embraced by more Australian companies, only cutting-edge companies have so far demonstrated an experimental streak in this regard in the rest of APAC. India’s leading travel planning and search engine is one of these. With its office space accommodating impromptu gaming breaks, ixigo.com has just been named one of the top 15 ‘Awesome Startup Workplaces’ to work for in India. Time for the C-suite to shake up their workplaces!

    Read more on how workplace trends play out in the region in our Global Corporate Real Estate Survey focus reports: Australia, Japan, and soon India.

    About the author
    Anne Thoraval is a Director, in charge of Corporate Research Asia Pacific.

    A Barometer Of CRE Confidence

    Tuesday, May 21st, 2013

    Only 28% of Corporate Real Estate (CRE) executives globally feel well equipped to meet all tactical and strategic demands from the C-suite and senior leadership.

    Correlating these responses with the acceleration of CRE outsourcing, we see that CRE executives fare better in mature countries such as the US, while in less mature ones the perceived ability to rise to the challenge is more limited. This is particularly true in Asia Pacific, where only 21% feel well-equipped region-wide and none at all in Japan.


    Source: Jones Lang LaSalle, Risks Ahead- Global Corporate Real Estate Trends, 2013

    Pressures resulting from this lack of confidence are not likely to subside. The spotlight shone on CRE two years ago as the result of the global financial crisis has only gotten brighter. Greater engagement with the C-suite and closer alignment between business and CRE strategy have led to an uncomfortably broad range of demands being placed on CRE professionals. Not only do CRE executives need to continue to deliver tactically, but an expanded set of more strategic demands are building up.

    At the tactical level, reducing costs remains at the top of the traditional demands that have been in play with CRE teams for some time. At the strategic level, delivering productivity outcomes is consistently cited as the most crucial. While workplace productivity improvement was featured in our 2011 report as an emerging trend for best-in-class workplace strategy, it is now reported as a high expectation by senior leadership. This primary focus is also taking CRE beyond the workplace to encompass people, business and asset productivity.

    Strategic requirements are coming as an addition to – not in replacement of – previous demands. They are calling for different skill sets and represent a drain on capacity. If combined with frequently low investment in the CRE function, mounting C-suite expectations increase the risk of CRE teams underperforming. Step change is needed for CRE to fully deliver to its elevated agenda. Read other survey findings in Jones Lang LaSalle’s report Risks Ahead! Global Corporate Real Estate Trends.

    About the author
    Anne Thoraval is a Director, in charge of Corporate Research Asia Pacific.

    Are Savings Just Thin Air?

    Thursday, April 25th, 2013

    On a trip back to Scotland a couple of weeks ago, what jumped out at me was how much better the air quality was in comparison to Hong Kong.

    This is far from a new topic, but realistically how do we address air quality in emerging Asia? In thinking of the interest groups and stakeholders involved this reminded me of the dilemma originally raised by ecologist Garrett Hardin. His theory tackled the socio-economic dilemma of a group of individuals when sharing a common resource. Known as “the tragedy of the commons,” this theory can be applied to a myriad of scenarios when society shares a common resource – in this case the wider environment.

    In its simplest sense, the theory references the practice of medieval common grazing by herdsmen for their cattle. It goes something like this. Any single herder will have a personal motivation to add one more cow to his herd, because even if the results of adding additional cattle to his herd cause overgrazing and damage to the pastures, the herdsman receives all the economic benefit of adding those additional cattle, whilst the damage to the lands is shared by all.

    Now, I’m not going to solve the air quality issues in Hong Kong in 500 words, but what is clear is that we all have a stake and responsibility in tackling these issues and this applies as much to real estate professionals just like myself. With a significant proportion of energy consumption being taken up by real estate, globally we have a duty and a responsibility to drive forward change to improve the impact we have on our “pastures.”

    Now what Hardin did not address in his paper was technology. Technology provides solutions to problems. Yes we can legislate, but the winning argument in relation to real estate in this debate in my mind is simply the bottom line. When businesses start to see the savings and benefits to their bottom line of adopting more sustainable new technologies in real estate, adopting new best practice will just become the natural course. Technology is already moving fast and the real estate industry has some brilliant technologies at hand already.

    The savings from sustainability are very real, not just on the impact we have on our “pastures” but on the bottom line. A great example is our new LEED Platinum office in Hong Kong. Our new office consumes 13% less energy per sq ft and better air quality has greatly improved the environment, indeed we’ve seen a 32% reduction in absenteeism.

    I’m not saying technology has all the solutions now and that the payback times and the investment are not prohibitive at times. However, what is true is that the more it’s adopted, the more the costs will come down making it a more viable option.

    A project we undertook in New York on the Empire State Building is a great example of how savings can be made even today. Not only did we deliver a project to improve sustainability which would pay for itself in three years by saving US$4.4m per annum in energy savings, the energy reduction and thus the impact on the planet, was in the region of 38%.

    So the lesson is this, not only is the technology here to save us from a similar “tragedy of the commons,” but it’s improving every day. The savings to the bottom line are real and it’s up to us as real estate professionals to promote best practice in our industry. We can’t solve transport and factory pollution; however, with a little effort from all stakeholders, there will be some very tangible benefits for the wider environment and also the bottom line of developers, tenants and landlords – our clients.

    About the author
    Roddy Allan is a Director, Asia Pacific Research for Jones Lang LaSalle, based in Hong Kong.