EY’s Teh Seng Leong joins esteemed panel of judges at the Real Estate Asia Awards 2023
He noted that property managers and landlords should pay close attention to their balance sheet/capital and cost structure.
Teh Seng Leong is the current ASEAN Real Estate Strategy and Transaction Leader and Global Real Estate, Hospitality, and Construction M&A Leader for EY in Singapore. Having been with the company for over 20 years, he was involved in various real estate transactions and worked with real estate funds, LPs, and developers, providing lead advisory, restructuring, and transaction advisory support on their investments and divestments.
Looking into the real estate industry of Asia Pacific, Teh mentioned that property managers and landlords should focus on paying close attention to their capital and cost structure given the heightened interest rate and inflationary pressures. There are also opportunistic transactions where deep values are beginning to appear in certain key segments of the market.
“Whilst such a challenging market has given rise to opportunities, this will likely occur in the commercial real estate segments, which face short-term challenges from rising interest rates and long-term headwinds from hybrid work,” he said.
As part of the esteemed judges for this year’s Real Estate Asia Awards, Teh provided some observations on the current status of the industry, including trends, opportunities, and challenges, and how industry players can remain resilient amidst market challenges.
With your expertise in the real estate industry, what are some of the trends you have observed in the industry this 2023? How can property managers and landlords leverage these trends?
Given the heightened interest rate and inflationary pressures which has an impact on replacement costs, the focus for property managers and landlords would be to pay close attention to their balance sheet/capital and cost structure. Whilst such a challenging market will give rise to opportunities, it will likely occur in the commercial real estate segments, which faces both short-term interest rate and long-term headwinds from hybrid work. Given the ability of property managers and landlords in the region to deal with the rising interest rates to date, it is also prudent to raise some cash via smaller divestments or increase financing lines to deal with liquidity headwinds.
How can investments in real estate remain stable despite challenges in the market? What can property managers and landlords do?
There will be volatilities – we have had nearly 15 years of Federal Reserve easy money environment since 2008, real estate is cyclical and it has been due for a correction. Having said that, the issue will be a liquidity issue as leverage as a percentage of value for most developers in South East Asia is not as elevated as the Asian Financial crisis.
How do you think global demands for ESG compliance and sustainability initiatives affect the real estate industry? How can the industry promote this?
There is too much noise in the ESG framework that confuses market participants as to what should be the priorities. I think that within ESG, the real estate industry should take the lead on priorities that it can make a difference in – especially on carbon footprint or net zero targets as a lot of the construction processes and real estate properties do impact ESG. There is a direct link to cheaper green financing in the event that the real estate participants are able to meet the net zero targets. These are economically beneficial and directly beneficial to asset managers and owners.
One of the key trends observed in the real estate industry recently is the emergence of metaverse properties. How do you think this will affect the industry? What are some possible risks this trend may bring for property managers?
Personally, whilst interesting, I think the metaverse use cases for the property sector are still nascent. Instead of trying to create and focus on too many priorities, the real estate sector should focus on items which can make the biggest impact.
Being one of the judges for this year’s awards programme, what qualities are you looking for in the entries?
In every crisis, winners typically will use this opportunity to pivot their business or take larger bets as opportunities and risk typically emerge around this time. Winners of such cycles typically make outsize gains and grow their portfolio especially when the market is volatile. As such, I would recommend that we look at the players that have been able to ride through the cycles – in the end, it would be those that use their balance sheet to acquire opportunistically.