Prepared cities best for Asia Pacific investors

Singapore, Melbourne and Shanghai are the most-prepared places in the Asia Pacific region to handle a crisis, according to Cushman & Wakefield’s inaugural Prepped Cities Index, released in November 2018. The index assesses the current level of readiness of 17 major cities in the Asia Pacific region on eight factors regarding the built environment (rent volatility, obsolescence, sustainability) and governance and the environment (governance, terrorism, talent, environmental susceptibility and cyber security). The average rating on these eight indicators produces a total score on a scale of 0–100.

With the growing frequency of acute events such as natural disasters and cyber attacks, the built environment and its inhabitants experience the repercussions of any adverse event, notes Cushman & Wakefield.

“Given that real estate is a pillar of the regional economy, coupled with the massive amounts of ongoing investment in the built environment, the real estate industry can directly play a role in making cities better prepared for the future,” states the report.

For the built environment, “the essence of these indicators is that a market comprising modern assets, a high level of institutional ownership, a forward-looking approach to sustainability, and limited pricing volatility is arguably better prepared to address unexpected events.”

With respect to sustainability, for instance, Australia is a global market leader, with recent legislation requiring all spaces above 1,000 square meters (10,764 square feet) — marketed for sale or lease — to have a NABERS (National Australian Built Environment Rating System) rating. In the table below, 71 percent of Sydney’s grade A buildings have at least a “very good” LEED rating or equivalent, the highest of the 17 indexed Asia Pacific cities. Only 14 percent of Hong Kong property assets, however, have the same rating.

For property investors and occupiers, Cushman & Wakefield advocate a four-stage plan for incorporating prepped cities into the portfolio decision-making process:

1. Geographical weighting:

• Understand the geographical distribution of your portfolio
• Proportion of portfolio in most- and least-prepared cities

2. Building performance:

• Undertake a building checklist
• How does your building compare to the wider market?

3. Management plans:

• Be aware of the greatest weakness in the portfolio
• Put management plans in place to mitigate weakness

4. Monitoring and updates:

• Monitor and update city/portfolio performance
• Build intelligent portfolio design into commercial real estate strategy

According to Cushman & Wakefield, the strength in utilizing a prepped-cities analysis is its applicability to each entity’s portfolio to help drive change through “intelligent portfolio” design — going beyond typical real estate metrics of rents, area of premises and costs of occupancy, and assessing additional data for strategic decision making.

“While we can never know when the next incident may occur, analyzing your commercial real estate portfolio in this way, and taking steps to address any shortcomings, will help minimize the worst outcomes,” concludes the report. “As with any insurance policy, it is better to have it and not need it, than to not have it when you need it most.”

Most prepared Asia Pacific locations for managing a crisis

*Totals may not sum due to rounding

** Grade A buildings with at least a "very good" LEED rating or equivalent

Sources: Cushman & Wakefield's The Prepped Cities Index, Green Buildings Information Gateway, Bloomberg News