Savills Prospects — Apr 2024: Design and Construction Sectors Embrace AI, APAC Retail Heading Towards Recovery, and Hong Kong Readies for Decarbonisation
Savills Prospects surveys current Asia Pacific sector trends and policy shifts that could have an impact on investors now, for 2024 and beyond.
Design and construction on the verge of an AI revolution
The real estate industry has traditionally lagged others in adopting new technology. However, artificial intelligence (AI) and Building Information Modelling (BIM) are beginning to gain traction. In APAC, the potential is enormous thanks to abundant development that supports innovation. These tools are helping realise projects that are designed, built and managed better. By embedding in the process, AI can maximise limited labour resources and space before construction. It can ensure more sustainable buildings and more efficient operations. Currently, AI and BIM are most prominent in mature markets such as Hong Kong, Singapore and South Korea. AI won’t replace human input and decisions, but it will provide more options. These technologies’ ability to help manage costs, predict delays and reduce waste will make them standards in the future.
Is Asia Pacific retail on the way back?
The retail sector in Asia Pacific is emerging from a challenging four years. Though individual markets vary, signs of recovery abound. Rents bottomed out last year but started rising in 2H/2023, supported by a number of positive drivers. One of those is APAC’s strong economic outlook. The region is predicted to have global best GDP growth of 4% in 2024. Another is the gradual but continuing recovery in the tourism sector. A third is the relative rebound in the luxury goods sector. Brands are still practising caution in expansion, but concept stores and experiential retail are robust. The overall outlook for retail investors is positive, but selectivity remains essential.
Hong Kong aims to be a global leader in climate action. To that end, the city has adopted an ambitious roadmap for decarbonisation. The goal is to be carbon neutral by 2050.
The city has targeted reducing emissions by 50% of 2005 levels in a decade. To do that, real estate will play an essential role. The built environment currently accounts for 90% of Hong Kong’s energy consumption. The foundation has already been laid and key elements are in place for decarbonising. However, small developers are not yet fully on board. Additionally, sustainability initiatives don’t cover the entirety of energy consumption in the city. Sustainability is also not yet part of mainstream business agendas. As such, the next vital steps involve mainstreaming sustainable practices and retrofitting existing buildings. Wider success will demand better data transparency and benchmarking. There must be a broader adoption of incentive-based green certifications. Finally, improved awareness and regulations that incorporate incentives, finance and valuations with decarbonisation are crucial. The pieces are in place. All that’s required is to act on them — now.
Author: Simon Smith
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