Flight to Quality and Building Resilience in Asia Real Estate

Top View Skyscrappers

In the aftermath of Covid-19, we are seeing an acceleration in real estate trends that were already at play prior to the pandemic. Having adjusted to a new normal, real estate stakeholders in Asia are now proactively adopting approaches toward mitigating risk, attaining resilience, and pursuing sustainable growth with Environmental, Social, and Governance (ESG) criteria in mind.

Held on August 5, 2021 in partnership with Colliers and Link REIT, the Marsh ‘Flight to Quality and Building Resilience in Real Estate’ webcast facilitated an enriching discussion of the topic with the benefit of expert insights. The following panelists featured in the webcast:

  • Hannah Jeong, Head of Valuations & Advisory Services, Colliers, Hong Kong
  • Calvin Kwan, Head of Sustainability & Risk Governance, Link REIT, Hong Kong
  • Cristina Vigilante, Managing Director, Head of Sales and Corporate & Commercial Segment Leader, Marsh Asia
  • Edward Farrelly, Real Estate Industry Leader, Marsh Asia (Moderator)

Highlights from the Real Estate webcast

In the hour-long webcast, the panel shared key trends, issues, and opportunities facing various stakeholders in Asia real estate, including property owners, developers, and tenants. The insights, solutions, and best practices presented in this webcast are applicable across property and development types, including commercial office, retail, industrial, residential, and mixed-use.

Hannah Jeong, Head of Valuations & Advisory Services at Colliers, spoke about the ‘flight to quality’ among property owners’ and developers by highlighting the trend of green retrofitting and the relationship between green certification and the value of real estate assets. Hannah’s key points include:

  • Patterns and trends in ESG-led real estate demand: The shift in tenants’ and occupiers’ leasing criteria and the factors influencing their decision-making.
  • Implementation of green improvements: How property owners are reconfiguring real estate assets and ways to secure green certification “quick wins”.
  • How green retrofitting and certification can impact the total value of an asset, citing a comparison of developments in Hong Kong with varying levels of green certification and quantifying impact on rental premium and capitalization rate.
  • Climate change effects on real estate valuation: How climate risk could potentially affect the perception, profiling and evaluation of real estate among tenants, investors, and insurers.

Calvin Kwan, Head of Sustainability & Risk Governance of Link REIT, outlined a holistic ESG framework that can enable real estate companies to position themselves for sustainable growth while building brand equity. Calvin’s key points include:

  • Key stakeholder concerns in Asia real estate, based on a survey revealing the issues real estate stakeholders are most and least concerned about in the coming five years.
  • Risk management framework for real estate: A consensus-building risk management approach that also serves as a platform to advance ESG and sustainability solutions and practices among both internal teams and external stakeholders.
  • A risk assessment methodology based on Task Force on Climate-Related Financial Disclosures (TCFD) requirements that facilitates accurate benchmarking of ESG performance and promotes standardized reporting within the real estate industry, which in turn helps investors and external stakeholders interpret ESG information.
  • Real estate ESG strategies in action: Best practices in setting ESG goals within the real estate organization, and how building owners and developers can leverage the social aspect of ESG to potentially enhance the value of their real estate assets.

Cristina Vigilante, Managing Director, Head of Sales and Corporate & Commercial Segment Leader at Marsh Asia, outlined the impact of ESG trends on real estate insurance and risk management. Cristina’s key points include:

  • ESG trends in real estate insurance: How insurers are starting to assess the quality of real estate assets differently in accordance with ESG criteria, and how ESG initiatives can potentially unlock access to more capital, or capital at more favorable pricing from an insurance perspective.
  • Emerging risks in real estate in Asia and their effect on insurer appetite for risk, highlighting the tendency for emerging risks and risk events to alter the appropriate coverage limit and create exposures that property owners may not be fully aware of.
  • Risk solutions for real estate stakeholders: How regular reviews of real estate portfolio valuations and business continuity processes can help mitigate risks, and how solutions such as scenario analysis, audits, and quantitative studies can help build resilience and optimize cost of risk within the real estate organization.
  • The need to review insurance valuations: Why, in light of Covid-19, companies should reexamine whether premiums are aligned to exposure and coverage is at the appropriate limits.

Watch the four-minute highlights video below or the full hour-long version of the ‘Flight to Quality and Building Resilience in Asia Real Estate’ webcast.

Strengthening your real estate risk management in an era of rapid and uncertain change

To be prepared for continuing structural shifts and emerging risk factors in real estate, stakeholders in Asia can benefit from a partnership with a trusted risk manager that is backed by a long-standing insurance broking track record.

Find out more about Marsh’s risk management capabilities and methodologies and how we can help your real estate organization build resilience and create a positive impact on your balance sheet via this link: Manage Your Real Estate Risks on the Right Foundations with Benchmarking