Real estate
Expanding innovation clusters are driving occupier demand in APAC
2 min read 13 Aug 21
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Following the colossal disruption caused by COVID-19, governments and businesses globally are seeking digital solutions for the next growth phase, and Asia Pacific economies are at the forefront. Home to a growing number of tech giants, we believe APAC’s expanding innovation clusters are likely to see steady growth in demand from occupiers.
The relevance of technology is evident like never before
The pandemic has accentuated the need for businesses to improve operational resilience and adapt faster to structural trends, in response to the need to function differently, or meet a potential surge in demand. This has placed increased reliance on remote working, automation and omni-channel retailing – made possible by digital solutions. The use of robotics in logistics, for example, to help manage stock and retrieve inventory, is becoming increasingly pivotal in an environment in which pressure on deliveries is growing, and the traditional labour force could face disruption.
APAC economies are at the cutting edge
APAC economies including South Korea and Japan are at the cutting edge of digital innovation, particularly around mobile technology, Artificial Intelligence and electric vehicles. In tandem, policymakers are actively promoting digitalisation through government support schemes, skill enablement and accommodative regulation. South Korea has committed up to US$95 billion to invest in new digital and green industries, as part of a plan to drive economic recovery and create circa 1.9 million jobs by 2025. Seoul's Pangyo Techno Valley will play a key role, providing testbeds and launch pads for research and development (R&D) teams to pursue innovative ideas.
"South Korea has committed up to US$95 billion to invest in new digital and green industries, as part of a plan to drive economic recovery and create circa 1.9 million jobs by 2025"
Investment in innovation is rising
Innovation clusters are likely to see steady growth
Innovation clusters like Pangyo, which hosts Facebook’s first R&D centre in Asia, are supported by growing public and private investment, and are likely to see steady growth in demand from tech occupiers, in our view. High quality office buildings in Singapore, Seoul and key Japanese cities are, therefore, expected to perform well. Furthermore, these highly collaborative campus facilities are resilient to home working, offering strong upside potential for investors.
Rapid digitalisation is also driving demand for data centres
Rapid digitalisation of developed economies is generating rising data use by both consumers and businesses, with accelerated growth as a result of limited face-to-face interaction. This is driving substantial demand for data centres across APAC, we believe placing the sector on a firm path to institutionalising. Yet hurdles to access remain, including the need to rationalise high energy use.
Capital at risk.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.