Three CEOs shed light on how the industrial, healthcare, and retail and office real estate sectors have been impacted by the pandemic – and how their companies are moving forward.

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Tony Lombardo, CEO, Lendlease Asia Holdings

While circuit breaker scenes – nary a vehicle in the Central Business District, and once-glitzy shopping belts deserted and lifeless – might appear to be straight out of an apocalyptic movie, it isn’t the end of the world. Tony Lombardo, CEO of Lendlease Asia, is confident the office and retail real estate sectors will bounce back.

He cites the examples of Chinese cities that have progressively returned to normal since April. “All of our construction sites in China are back at 100 per cent and our large developments are back to 95 per cent capacity. While we don’t own malls in China, we have talked to businesses and they say their malls have about 80 to 85 per cent traffic. Office activity is also back to normal – there doesn’t seem to be a material shift. It takes a while for people to have the confidence to come out again, but China is a good example of how things can return to normal.”

Outside of China, Lombardo shares that Malaysian malls which reopened early last month saw a return of 60 to 70 per cent in foot traffic within the first weeks. Lendlease’s largest integrated development in Asia, The Exchange TRX in Kuala Lumpur – projected for completion in 2025 – has also garnered a healthy lease rate of over 50 per cent of its retail space.

But how the rest of the world will recover remains to be seen. Of course, some rethinking is in order – even for a giant like Lendlease, which has grown from an Australian construction company to an international property and infrastructure group in 62 years. As at Dec 31 last year, Lendlease Asia’s total assets under management stand at A$8.8 billion (S$8.1 billion), with A$9.3 billion in funds under management.

The company has four retail assets in Asia, with over 640 retail tenancies held across Parkway Parade, 313@Somerset and Jem in Singapore. It developed, constructed and manages Paya Lebar Quarter (PLQ), comprising three Grade A office towers, a condominium complex and PLQ Mall, which opened last year. PLQ covers close to a million sq ft of prime space for some 10,000 working executives, and 340,000 sq ft of retail space offering a myriad of shopping, dining and entertainment experiences for shoppers.

“We are seeing from statistics that we are going into recession and that would impact demand. The way we use the office might shift – some companies might move to agile working, getting staff to come in only when they need to. How office spaces are designed will also need to be changed but, by the looks of it, we will still need them,” says Lombardo.

Retail – which has been grappling with the effects of e-commerce – will also be going through a significant shift. He shares that the company has already been implementing strategies such as attracting online businesses to open in malls. “We will see some shifts around how we will work and shop, and we are likely to relook malls – not just as shopping venues but also as community spaces, with lots of open areas for people to enjoy.

“The Covid-19 situation has created a lot of uncertainty. The next three to six months will be crucial. In the short term, we will keep our business operations tight, and make sure we have the liquidity to maintain a strong balance sheet.

“But we will also need to survey customers before we can understand the changes that people want in real estate. That said, our long-term growth strategy doesn’t shift because we will continue to see more cities getting urbanised,” he says.

As a company with roots in construction, Lendlease has been active in supporting governments with urbanisation plans. Lombardo adds that past financial crises have thrown up opportunities for the company in terms of securing mixed-use sites under urban renewal schemes put up by governments, which seek to drive the economy through releasing land and creating jobs.

Acknowledging that the Covid-19 crisis is a different animal, he says, “In my working career, this is the first time I have experienced anything of this magnitude.”

He was chief financial officer of Lendlease Group before taking up his current role in 2016. “While the immediate challenges of the pandemic – from ensuring staff safety to making sure the business can survive the interruption and disruption – might keep me up at night, I am also excited about how we will be looking at real estate differently.

“Disruptions create innovation. The digital side of our business will see accelerated development, and we have been making a lot of headway since William Ruh, the former CEO of GE Digital and chief digital officer of General Electric, joined as Lendlease’s CEO for Digital in 2018. We have been investing heavily in ways to disrupt our own business, which should throw up some exciting opportunities.” 

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01 Among Lendlease Asia’s four retail assets in Asia is 313@ Somerset. Slated to open in 2025 is its largest integrated development in Asia, The Exchange TRX in kuala Lumpur (previous page).
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02 Paya Lebar Quarter, which opened last year, comprises three Grade A office towers, a condominium complex and PLQ Mall.




“Retail sales for the past 12 months have been in the red, and every retailer and landlord is grappling with e-commerce and possibly consumerism fatigue. Covid-19 is the gastric flu that will force the industry to purge any mall that doesn’t cut it,” opines Desmond Sim, head of research for South-east Asia at CBRE Singapore.

Alan Cheong, executive director for Research and Consultancy at Savills Singapore, posits that this is an opportune time to restructure on many fronts. “Presently, the majority of landlords collect a high base rent and a Gross Turnover (GTO) rent, whichever is higher. The restructuring would entail more emphasis on GTO terms – so that the landlord has more skin in the game… Our retail space isn’t oversupplied yet, but landlords need to work hand-in-hand with retailers. The horse is dead, better start walking!” he cautions.

Sim highlights other means of collaboration: “Landlords and retailers have to work together to exploit omni-channelling technology. At present, mall apps are at best a glorified directory. But what if users get a discount on a product they purchase through the app, but collect from the shop? This…also allows the landlords to track sales. Such technology exists yet is not widely implemented. The pandemic will push the industry to think strategically – and act on it.” 
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Yong Yean Chau, CEO and executive director, Parkway Trust Management; manager, Parkway Life Reit

If you are trying to search for a market segment that has largely been spared the ravages of the global pandemic, look in the direction of healthcare Reits.

“(Healthcare Reits) have remained resilient, supported by the long-term prospects of the industry,” observes Yong Yean Chau, CEO and executive director of Parkway Trust Management and manager of Parkway Life Reit.

He attributes the steady growth of the Reit to increased spending in the healthcare sector, driven by a few factors: ageing populations, the rise of lifestyle diseases such as diabetes and hypertension, and growing disposable incomes that have led to a higher demand for higher quality healthcare and aged care services. These are also the long-term drivers for the industry.

“Our biggest achievement is having the support of a strong, cohesive and committed team that has helped drive the company’s strategy. With that, our portfolio of healthcare assets has performed well and we have more than doubled our assets under management, with Distribution Per Unit (DPU) having grown by 108 per cent since IPO. The stock has also enjoyed a total return of over 320 per cent since IPO,” shares Yong.

DPU is a measure of how much an investor gets for every share held in the Reit.

Parkway Life Reit has a total portfolio size of approximately $1.96 billion as at March 31 this year, and this includes Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital in Singapore, 49 other healthcare or healthcare-related real estate assets in Japan, and strata-titled units in MOB Specialist Clinics in Malaysia.

Since its listing in 2007, it has grown into one of Asia’s largest healthcare Reits by asset size.

While traditionally offering relatively lower DPUs, healthcare Reits are typically viewed as “defensive, yield-generating investments that are poised to enjoy multi-year growth prospects, even amid the current uncertain economic climate”. Elaborating on Parkway Life Reit’s stable performance, he shares that its DPU has increased by 1.4 per cent year-on-year.

Yong, who joined the real estate industry in 1996, has weathered multiple crises in his time. “Back in 2008, despite the economic recession, Parkway Life Reit entered Japan with our first acquisition of a pharmaceutical product distributing and manufacturing facility.

“Since then, we have ridden unprecedented demographic shifts in the country and continue to do so. This has allowed us to more than double our portfolio.”

However, he recognises that every crisis is different. While the company has been able to navigate changes and volatilities by staying vigilant and nimble, there is no one-size-fits-all approach. In the current pandemic, the company’s ethos of working in collaboration with strategic partners for sustainable long-term relationships has been something to leverage on.

“The pernicious effects of Covid-19 remain, placing increasing pressure on all industries and sectors,” says Yong. “We have seen limited impact on our properties to date. However, the situation is evolving rapidly and we will continue to monitor for developments. It is imperative for us to stand in solidarity with our tenants.”

To this end, Parkway Life Reit has set aside a Covid-19 relief budget to provide targeted assistance for affected tenants.

Although the outlook of a nose-diving global economy has dampened business sentiments, he foresees a continued interest in healthcare assets.

“Looking at the example of China’s recovery after the worst of the pandemic, there are emerging growth opportunities…for real estate markets in sectors such as healthcare and real estate technology,” shares Yong, who also enthuses about regional opportunities.

“We see opportunities in our key markets, especially in the healthcare and eldercare sectors in Japan, which has the highest proportion of elderly in the world. With improving healthcare and lower incidences of morbidity in old age, the life expectancy there will increase to 87.92 by 2050, leading to increased demand for nursing home facilities.”

In Singapore, he believes that the private sector stands to play a key role in increasing the capacity, quality and sustainability of healthcare services. This, coupled with the expectation for medical tourism in Singapore to do well, further improves the sector’s long-term prospects.

Yong also notes a rise in global demand for healthcare.

“By 2050, one in six people in the world will be over the age of 65, up from one in 11 in 2019. With that in mind, we have been working towards establishing new growth drivers, beyond our established markets,” he says.

“We are constantly identifying new growth engines and avenues for targeted investments, as well as cultivating relationships with local consultants and players, to source for quality assets to enhance growth.” 
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03, 04 Palmary Inn Suma (above) and Excellent Tenpaku Garden Hills are nursing homes sited on freehold land in Japan, which offers key opportunities for growth in the eldercare sector.



The last decade has seen the average allotment of office space shrink from 120 sq ft per person to just 80 sq ft, but this is expected to increase, given the need for better social distancing. In this respect, Sim also feels that developers will move from seeking Green Mark certification to WELL certifications, which take into consideration factors such as community health.

In the healthcare sector, Cheong feels that the healthcare assets will benefit only after the lockdown measures have eased globally, and when travel restrictions are lifted. “The high market value services lie in medical tourism,” he says. “Even if the Government builds more hospitals for the locals, public hospitals as an asset do not benefit the private sector. Given the limited number of private hospitals here, you will need a flow of medical tourism for them to go back to the norm.”


“Hospitality was looking very, very bright at the start of the year, but currently it is submerged so deep I have no idea where to look!” says Cheong candidly. “Where the industry will go is a great unknown. In the US, people are now expecting no-frills hotels with contactless check-in. There is no clarity on the forces that will shape the new structure and outlook of the industry.”

Sim – who notes that smaller-scale business hotels in countries such as Japan and South Korea have been shutting down – feels, however, that the local hospitality industry might not necessarily be devastated. Occupancy rates are being propped up by the Government to a level of 60 to 70 per cent, as compared to almost zero in some other countries.

Further, he predicts that travellers from Singapore’s top five tourism markets – China, Indonesia, India, Malaysia and Australia – will be confident to return, just as many Singaporeans will be raring to travel out to the region once regulations ease. “It will be tough to achieve last years’ figures, north of $19 million, but there is a sense of confidence for tourism to come back,” he shares.

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Donald Han, CEO, Sabana Reit

Cold, grey factory spaces often come to mind when “industrial real estate” is mentioned. But that certainly isn’t how Donald Han sees this sector. As CEO of one of the world’s largest listed Syariah-compliant industrial Reits managing some $1 billion in total assets – including high-tech and general industrial, as well as chemical warehousing and logistics – he sees them as vibrant spaces with integrated retail and F&B areas to support the industrial functions.

Sabana redefined its strategy when Han took the reins in 2018, and its plans for growth covered three phases: optimisation of portfolio through targeted divestments; evaluation of key strategic assets with under-utilised plot ratios, where footprint can be increased through asset enhancement initiatives (AEI); and expansion by acquiring yield-accretive properties in Singapore or abroad. AEI refers to strategic renovations to improve income yield.

Now in Phase Two, Sabana is carrying out AEI work on its flagship asset, New Tech Park (NTP) in Lorong Chuan. It’s working to add a mall with nearly 43,800 sq ft of retail and F&B space to complement the core industrial block. “The AEI will create an integrated work, entertain and play space for our tenants and to attract new visitors,” says Han. “There will be a new retail podium which will provide our 3,500 tenants with an array of dining options as well as a gym, supermarket and lifestyle retail services.”

In essence, the move is expected to help drive up occupancy by strengthening demand for the industrial block.

“We are already seeing the positive knock-on effect. Almost all tenants with leases up for renewal have extended them since construction began last year.” Already, NTP has gathered interest from companies in the fintech sector, and top F&B corporate offices that are keen to relocate. Han adds that “27 per cent of the mall space has already been leased, with another 43 per cent under advanced negotiations. We look forward to its opening in the third quarter of 2020”.

Such rethinking is critical as he reveals that the industrial real estate sector has come down from its peak in 2013 and 2014, and both rents as well as capital values are some 30 per cent lower. “We were starting to see the industrial sector bottoming out but, as expected, the Covid-19 pandemic has changed that. Most sectors are on a firm downtrend now, including industrial real estate.”

The property veteran points out that the manufacturing sector – which accounts for approximately 25 per cent of the GDP and is a substantive engine of industrial space demand – has been in recession for more than 15 months due to the trade war between China and the US.

“A recent survey by the EDB showed that Singapore manufacturing and services firms are more pessimistic about their prospects over the next six months amid the pandemic,” Han says. “This is natural as Singapore is an export-driven economy, while larger regional economies with huge population bases can still be cushioned by local consumption. Covid-19 has created a seismic dampener on demand. More industrialists are looking to lower real estate footprint and reduce occupancy cost.”

Despite the doom and gloom, he sees light on the horizon – coming from the pharmaceutical, logistic, biomedical, medical, technology and telecommunication sectors. “Due to an oversupply of space currently, these companies have plenty of relocation options. They are always looking for newer, high-techspecific properties in central Singapore like NTP or those near retail centres and train stations. Warehouse and logistic properties are also in demand, thanks to the e-commerce emergence.

“Sabana Reit is well-positioned for these trends. Most of our 18 properties are located in strategic, sought-after locations, and we have a strong track record of serving the needs of the new economy. Indeed, 82 per cent of our properties are designed for high-tech and/or warehouse and logistic use.”

Han also predicts that, given the rental growth in the CBD office market in the last three years, many tenants will be looking to move back-end and even front-end operations out of the CBD to capitalise on lower occupancy cost and for business continuity purposes. In particular, technology firms will be looking towards decentralised locations that can meet their needs.

Han, who has led companies through the 1997 Asian financial crisis, the bust at the start of the millennium and the 2009 global financial crisis, remains optimistic. “Every recession will inevitably see some big names come under threat, but the key to survival during these tumultuous times is not to lose strategic focus and to maintain prudent cash flow and debt management while having even closer engagement with stakeholders to communicate plans. I know we can get through this together.” 

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05 & 06 Sabana’s flagship asset, New Tech Park in Lorong Chuan, is seeing the addition of a mall to offer retail and F&B options, in order to complement the industrial block.



This might come as a surprise, given the common prediction for a slowdown in the manufacturing sector, but “this sector holds the greatest investment potential”, says Cheong.

He points out that it is likely to reorganise its operations and highlights three factors that might push the need for industrial real estate: supply chain consolidation; inventory management moving from Just-In-Time to Just-In- Case; and manufacturers concentrating production and storage in or near markets.

More importantly, there would also be increased demand in seven areas: vertical farming and agrotechnology, and cold chain storage – both a reaction to our country’s goal for 30 per cent home-grown food; business continuity planning centres; data centres, especially with the introduction of 5G; sustainable industrial and logistic facilities; Industry 5.0, which sees modern manufacturing processes transformed to integrate work for man and machine; and tech incubator/research facilities.

Sim paints a more conservative picture. “The immediate impact of Covid-19 is a fall in the purchasing index. While Singapore will benefit as companies shift manufacturing bases out of China and into South-east Asia – as their products are likely to go out to the rest of the world via Singapore – our manufacturing sector largely produces intermediate products, and we will be impacted when regional markets are sick.”