Real estate agencies are now disrupting the commercial property market in Southeast Asia where institutional investors can enjoy a full suite of services ranging from buying and selling to interior design.
When Jones Lang LaSalle ( JLL)announced in 2016 that it had acquired PDM International, a leading interior design practice with a 20-year track record across the Asia Pacific, some in the architectural and design field had mixed reactions to it.
“I think it makes a lot of sense and there are significant synergies between the two businesses,” said Karen Tan, founder and director of design firm Pocket Projects.
“A real estate firm should focus solely on brokerage services and not design,” said an architect who wishes to remain anonymous.
Whatever it is, there is no doubt that JLLis disrupting how traditional real estate and design industries work which could give its peers a run for its money.
According to the firm, “the acquisition is the latest example of JLL’s disciplined acquisition strategy which, since the start of 2015, has seen JLL announce or close more than 40 margin-accretive transactions with a combined value of approximately US$1.2 billion.”
With more than 180 professional staff, PDMis noted for delivering innovative and creative design and construction solutions for office, retail, hospitality, residential and leisure realestate projects.
From designing the uber cool Adidas Shanghai headquarters to the sleek UBS office space, JLL’s latest arsenal is certainly shaking up the market.
According to JLL, PDM’s design and construction expertise will complement JLL’sProject Management and Construction Management capabilities.
“With the addition of PDM, JLL will be able to provide design and construction services in 19 cities, with the addition of Beijing, Shanghai, Bangkok, Kuala Lumpur and Seoul, and continue to provide project management in 27 cities across Asia Pacific,” the firm said in a statement.
DISRUPTING THE MARKET OR BECOMING A JACK OF ALL TRADES?
When contacted, one analyst from one of the big four real estate firms in Singapore who wishes to remain anonymous says JLL’s latest strategy is a “threat” in an already crowded and stiff marketplace.
Meanwhile, another welcomed the competition but cautions against the firm “becoming a jack of all trades”.
“It is certainly admirable what JLL is doing by breaking market conventions. However, it should not lose focus from what a traditional real estate agency should provide such as buying, selling and leasing services. Having said that, I am confident that our clients will continue coming to us based on the strength of the services we have offered over the years,”said another.
For JLL, however, the acquisition is in tandem with market demand the firm is seeing as well as changes in Singapore’s retail sector.
“Demand for design, construction and project management services for the office (interior fit-out) sector has been mostly stable over the past2 years, through a constant churn of volume with corporate tenants relocating from older to newer buildings, expanding or right-sizing to suit their business demands. The retail sector (“brick and mortar” stores) has been affected by changes in consumer patterns and the rise of e-commerce,” said Darren Wee, Head of Project Development Services, JLL Singapore.
Indeed, Singapore’s retail sector had sailed through quite a challenging year in 2016 as consumers tightened their belts as the city-state narrowly escaped a technical recession in the fourth quarter.
According to the Savills Research &Consultancy, in the fourth quarter of 2016, the vacancy rate for retail malls in Singapore’s prime Orchard Road and Downtown Core districts fell by 2.6 percentage points quarter-on-quarter to 10.7 per cent and 1.2 percentage points to 6.8 per cent respectively – the lowest level recorded for the year.
“Retail sales recorded a fall in the fourth quarter of 2016, even though the last quarter is the seasonally stronger period for retail sales,”cites Savills Research & Consultancy.
As the market changes, JLL’s evolution is thus crucial if real estate firms were to stay relevant by providing clients what they want.
SINGAPORE’S UNIQUE DESIGN CHALLENGES
In Singapore where land is scarce and where commercial real estate ranks as one of the most expensive in the world, JLL says the design challenge here differs greatly from other Southeast Asian countries.
“Commercial office space is relatively expensive, so the design of space must be creative and efficient to make the best use of the real estate while providing adequate levels of comfort for occupants. Leases are short and organisational changes fluid, hence the design of space has to allow
for flexibility in use and ease of change whenever the need arises,” said Wee.
In addition, building designs are becoming more green and sophisticated in line with the Singapore government’s push towards sustainable developments as well as changes in building technologies.
“Sustainability standards are widely implemented across the industry and therefore the design of buildings and interior spaces will have to meet these standards. There is also a big push for more adoption of newer technology in the whole design and construction value-chain for example Building InformationModelling (BIM), Virtual Design & Construction (VDC) and VirtualReality (VR) (Virtual Reality), as a way to increase productivity in the industry and also as a response to the wave of disruption sweeping across all sectors of the economy,” said Wee.