MODUS Asia-Pacific Edition | Q3 2019

®

Q3/19 ASIA-PACIFIC EDITION

Do we need to rethink coastal development? 14

BUILDING RESILIENCE 22 / PORTS INVESTMENT: A MATTER OF CONTROL 26 / THREE WAYS TO BEAT FLOODING 40

RICS CONTACTS

INTELLIGENCE

FEATURES

04

12

Deconstructed Will India meet its aim to build 20 million homes by 2020?

RICS Awards 2019 Celebrating the big winners in Southeast Asia, Australia and New Zealand

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06 Opinion JLL’s James Taylor on Indonesia’s emerging logistics sector

FOR RICS Rory Tufano and Jeanie Chan (Asia Pacific) Stephanie Bentley (UK) FOR SUNDAY Editor – Asia Pacific Andy Plowman Contributing Editor Alex Frew McMillan

07 Chartered territory With which measure can the industry best fight climate change?

Designer Katie Wilkinson Editor – Global Oliver Parsons Art Director Sam Walker Creative Director Matt Beaven Account Director Karen Jenner Senior Account Manager James Cannon Asia Advertising Bryan Chan Production Manager Michael Wood Managing Director Toby Smeeton Repro F1 Colour

09 President ’s column Chris Brooke FRICS makes the case for surveying’s own giant leap

Cover István Szugyiczky

10

Published by Sunday,

What we can learn from … … Japan’s legacy planning for the Rugby World Cup and Olympics

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207 Union Street, London SE1 0LN wearesunday.com Advertising enquiries Bryan Chan, ROF Media, +852 3150 8912

EXPERIENCE

Views expressed in Modus are those of the named author and are not necessarily those of RICS or the publisher. The contents of this magazine are fully protected by copyright and may not be reproduced in any form without the prior permission of the publisher.

All information correct at time of going to press. All rights reserved.

The publisher cannot accept liability for errors or omissions. RICS does not accept responsibility for loss, injury or damage or costs that result from, or are connected in any way to, the use of products or services

46 How to … … futureproof our workspaces, as told by those responsible for them

49

sustainable, properly managed forests. This magazine can be recycled for use in newspapers and packaging. Please dispose of it at your local collection point.

The polythene and paper in this pack are recyclable.

The coastal erosion conundrum How do we balance development with defence when building on our coastlines?

22 Fit for the future?

Developers are starting to factor resilience into new projects, but what about their existing assets?

26 Port without authority With port ownership becoming a political issue, is the investment worth the trade-off?

32 New world ordered Insights for the future from this year’s RICS World Built Environment Forum Summit

36 Building blocks Is the tokenisation of real estate investment via blockchain a passing fad, or here to stay?

RICS news, events and notices

advertised. All editions of Modus are printed on paper sourced from

14

50 What if?

Building homes to minimum space standards is a good idea, isn’t it?

40 Water world Profiling the projects providing solutions to a world in which flooding is a part of life

INTELLIGENCE

Affordable housing / Indonesian logistics / Tackling climate change / Tokyo’s Olympic legacy /

MVRDV’s 1,068-unit Future Towers complex in Pune is designed to house a diverse cross-section of the city’s exploding middle classes

DECONSTRUCTED

HOUSING FOR ALL WHO CAN WAIT

INTERVIE W BY ALE X FRE W MCMILL AN; IMAGE BY OS SIP VAN DUIVENBODE

Indian prime minister Narendra Modi’s campaign pledge to build 20 million affordable homes by 2022 is faltering.

Vipul Roongta explains what’s needed to get it back on track

Fuelled by rapid urbanisation and a booming middle class, India has a huge pent-up demand for affordable housing.

To make up an estimated shortfall of 20 million homes, prime minister Narendra Modi launched a scheme in 2015 called “Housing for All by 2022”.

As part of the scheme, the government has implemented several policy initiatives to make housing affordable for the larger Indian middle class. Perhaps the most important of these is the Real Estate (Regulation and Development) Act. The act imposes financial and even criminal penalties on developers if projects are not delivered in a timely manner; prohibits developers from starting sales without the correct permits; and requires 70% of sales collections to be deposited in an escrow account, to meet project expenses.

The administration has rolled out other measures such as a government interest subsidy for home buyers; income tax exemption for affordable housing projects; and an increase in floor-area ratios, resulting in a lower effective price per square foot of land. In spite of all these measures, analysts forecast that the gap between demand and supply is widening.

The “Housing for All” scheme has set 2022 as the deadline because that’s the year India celebrates 75 years of independence.

But the country faces ongoing obstacles in its quest to meet that target.

One of the key challenges is the current lack of flexible, long-term capital. Banks in India are prohibited from providing finance for land acquisition, or to projects without development approvals. As a result, there is a large funding gap for developers seeking to increase their land bank. Holding costs are high during the sometimes lengthy period needed to obtain approvals. It’s tough to refinance high-cost capital.

Closing the gap A potential template for financial companies to follow can be found in the $1.1bn private equity fund that HDFC Capital Advisors has recently established, which seeks to address the demandsupply gap through a combination of funding, partnerships and technology.

The fund will provide long-term, equity and mezzanine capital to developers at the purchase or pre-approval stage if they commit to building affordable housing.

Developers who partner with HDFC will have access to long-term capital, and be encouraged to create their own operational capabilities in areas such as design, technology, project management, sales and branding. A mentoring programme to partner with and invest in proptech companies will help drive innovation within the affordable housing ecosystem, creating efficiencies and lowering costs at each stage of the development cycle.

But solutions to the affordable housing shortage cannot come from the private sector alone. There are extreme infrastructure challenges both in rural and urban areas. The adequate provision of water, transport, sewerage and power is a pressing issue; as is the painfully slow planning system. The government needs to streamline the process of obtaining approvals for construction, as delays result in substantial cost overruns. The concept of a “one-stop shop” for clearances is widely recognised as an effective tool.

Ironically, there is also a substantial amount of existing housing that remains unsold. Buyers lack confidence in the ability of developers to complete projects, which has adversely affected cashflow for projects that are already under way. That is the main constraining factor on housing development right now; government support is required to kick-start these stuck projects and restore customer confidence.

There is no denying that the development of affordable housing in India has gathered momentum in the last four years. But equally, there is still a lot of work to do by 2022, and beyond.

Vipul Roongta is managing director and CEO of HDFC Capital Advisors. RICS has published an insight paper, International models for delivery of affordable housing in Asia, which can be read at rics.org/affordableasia Q3 2019 / MODUS APAC / 5

INTELLIGENCE

“ INDONESIA’S LOGISTICS SECTOR IS READY TO DELIVER FOR INVESTORS ” JAMES TAYLOR HE AD OF RESE ARCH, INDONESIA, JLL

In July this year Logos broke ground on its latest warehouse development in greater Jakarta. The Logos Cileungsi Distribution Centre will be the Australian developer’s second project in Indonesia, and the first to the south of Jakarta.

With $400m in backing from two of Canada’s biggest pension funds – the Canada Pension Plan Investment Board and Ivanhoé Cambridge – the group’s first foray into the Indonesian market was the purchase in 2017 of a 10.4ha site at Pondok Ungu, in the city of Bekasi east of Jakarta.

The developer subsequently purchased a neighbouring site and construction of the 193,000 m2 Logos Metrolink project is now well under way, with the first phase due for completion later this year. In addition to these projects, Logos has also acquired a 23ha site at Deltamas, also in Bekasi.

Back in 2016, I co-wrote a white paper on the logistics sector in Indonesia. At that time, the market was extremely immature.

But the potential for growth was obvious, with investors attracted by the country’s massive population and growing economy.

The lack of high-spec warehouse space meant there was a gap waiting to be filled.

Logos was the first specialist overseas logistics developer to enter the Indonesian market, and they did so without a local partner. Despite perceptions to the contrary, international developers have the same rights in terms of land title as local groups, although new entrants might prefer to partner with a local company in order to benefit from local knowledge or access to land banks.

Some of the market dynamics that I described in 2016 still apply today. The market remains undersupplied, despite a growing supply pipeline, and most existing stock is fully or nearly fully occupied. After large-scale investment in infrastructure and a rapid rise up the World Bank’s ease-ofdoing-business rankings, Indonesia is also a more attractive investment destination today than it was before Logos entered the market. The obvious question, then,

is why aren’t more developers, private equity groups, sovereign wealth funds and investment banks flooding into the market?

Some of the challenges that I identified in 2016 also remain valid. There was a massive uptick in land prices between 2010 and 2014, when rental growth was only moderate, and high land prices still make it difficult for investors to make an investment case from a yield perspective.

Data availability and a lack of transparency also present a problem for international players, who tend to require a long timeline of data and transactional evidence that simply doesn’t exist in Indonesia. We have had to build a database from scratch given the lack of public or private data sources.

Having said that, interest in the logistics sector has increased exponentially over the past three years. Industrial and residential have been the most active sectors for JLL’s research team, with first-time market entrants looking at development projects or joint ventures, primarily in greater Jakarta.

Groups with experience in Indonesia are more likely to have additional appetite for opportunities across the country. Surabaya is worth a special mention: Indonesia’s second city is the gateway to East Java and the eastern islands. The port city has a small but growing market of modern logistics and warehouse space.

Some investors have taken the plunge to deploy capital in Indonesia, while others have held back due to the challenges I have previously mentioned. Interest in the local warehouse market is only likely to increase, though, because Southeast Asia’s largest economy, and the world’s fourth most populous country, is a market that will ultimately prove too attractive to ignore.

ILLUSTR ATION BY DANILO AGU TOLI

OPINION: EMERGING MARKETS

CHARTERED TERRITORY

HOW CAN THE BUILT ENVIRONMENT BEST HELP FIGHT CLIMATE CHANGE?

YOUR RESPONSES ON T WIT TER @LEE_WILKINSON2 Pretty close call @RICSnews – the whole #built environment just needs to ask itself on each design: is it enough, what else could we do?

The number of cities worldwide to have declared that we are facing a climate emergency is now nearly at 800. With the built environment sector contributing nearly 40% of energyrelated CO2 emissions, how should the sector respond? We took to Twitter to find out …

@CAPTATE1

39%

USE LESS CONCRE TE AND GL ASS

5%

WE ’ RE DOING ENOUGH NOW

15%

Pity these questions [are] still being asked if all the answers have been around for a few years.

@DROP_THE_PILOT Stop knocking down old buildings and re-use them. Voila!

Beautiful cities, less waste, less hazardous materials clogging the air and sewers, fewer industrial machines spewing out dangerous gases.

The obsession with renewal is ridiculous. Re-use is what matters.

@LEIGH_MCIAT

SMARTER #FACMAN SYSTEMS

41%

Monitor in-use performance and take action when sustainability rating metrics, including predicted energy use, aren’t hit.

A GREEN BUILDINGS PREMIUM

Q3 2019 / MODUS APAC / 7

Upcoming events in September Singapore • CPD seminar | 25 September: Prolongation Cost • Training | 26 September: Pre-contract Project Management Techniques Malaysia • Training | 5 September: Asset Management - Tools, Techniques and Practices • Training | 24 September: Property Valuation for Non-valuers • Training | 26 September: Construction Project Management Series - Loss and Expenses Indonesia • Training | 10 September: FIDIC Masterclass Series - Contract Fundamentals

Register today at rics.org/asean

ILLUSTR ATION BY DANILO AGU TOLI

PRESIDENT’S COLUMN

Fifty years ago, Neil Armstrong and Buzz Aldrin landed on the Moon and took humanity’s first steps beyond the Earth. This was one of the 20th century’s greatest scientific and engineering achievements; but what if I told you a surveyor made it to the moon first?

We remember the Apollo Program through its stories of success and sacrifice.

Yet it was the Surveyor Program – a series of unmanned missions to map the Moon – which first scouted locations where astronauts could land safely.

Apollo 11’s lander touched down 25 km away from the site where Surveyor 5 had landed two years earlier. By the time Surveyor 5’s mission had ended it had returned thousands of pictures of the lunar surface, similar to how RICS professionals are using drones to gather data today.

It was this crucial environmental and topographical data that allowed Armstrong and Aldrin to fulfil NASA’s great ambition on behalf of 3.6 billion people back on Earth.

This achievement raises an important question for our profession today: as we look to the future of surveying, what skills and talents will we need to possess to solve the problems of the 21st century, and why?

Our answer begins with a challenge. By 2050, our industry needs to find solutions to how the planet can accommodate almost triple the amount of people who were alive when we first reached the Moon. We will need new talent to help us achieve this objective in a sustainable manner. The Global Footprint Network calculated that we are consuming the Earth’s resources 1.7 times faster than its natural replacement

rate. The global built environment industry is a massive contributor to this problem as, according to the UN, it currently consumes one-third of all energy, and produces just over one-third of all CO2 emissions.

Together, these factors put great pressure on our industry to increase the rate of change. There is huge demand for bright young people from the broadest reaches of our societies around the world to enter our practices. They are the future of our profession. We will need them to challenge our conventions and ensure that we evolve in sync with the communities we serve.

The significant challenges of this century have already inspired some excellent ideas in the built and natural environment, many that address the problems inherent of a busier world. Many professionals are also developing business models that promise to disrupt real estate – a market that represents around 70% of global wealth – and pivot it towards a greener future.

The task of landing people on the Moon represented more than just a show of scientific achievement. It was a unifying challenge; it refocused the energies of a nation into developing skills that could solve contemporary problems and accelerate the pace of change. Today, galvanised by the desire to create a more sustainable built world, we as a global profession must focus on raising another generation of innovators who will adopt relevant ideas to lead that change.

We also need those people to champion these ideas in our own organisation. This new way of thinking must now underpin the reconstituted strategy body of RICS, Governing Council, which we are holding elections for this October. I fully believe that, with your support and involvement in these elections, we can guarantee our profession continues to lead in providing confidence in the built and natural environment, ensuring the communities we serve around the world succeed for decades to come. Have your say in shaping our future at rics.org/elections.

“ TO SHAPE THE BUILT ENVIRONMENT OF THE FUTURE WE NEED TO SHOOT FOR THE MOON ” CHRIS BROOKE FRICS RICS PRESIDENT

Q3 2019 / MODUS APAC / 9

INTELLIGENCE

Construction of the New National Stadium in Tokyo was delayed after the original plans were scrapped for being too costly

WHAT WE CAN LE ARN FROM…

J A PA N ’ S P R EGAMES BUILD UP Ahead of a bumper year of sport, Daniel Cox sees much to cheer about in the country’s legacy plans for its venues

IMAGE BY GE T T Y

The Rugby World Cup, which kicks off next month in Japan, is soon followed by the 2020 Olympics in Tokyo. Thanks to the adaptive reuse of existing venues and smart, controlled new construction, the country is unlikely to succumb to the “white-elephant syndrome” that is often associated with international sporting events.

Only the Kamaishi Recovery Memorial Stadium is a new addition for the rugby, a revitalisation project in the area devastated by the 2011 tsunami.

Instead, rugby’s flagship event is using many of the stadiums built for the 2002 football World Cup. Tokyo is being equally smart about the summer Olympics and Paralympics.

Getting into shape A dozen of the Olympic venues were built for the 1964 Games in Tokyo. Most are still used today, for a variety of purposes.

The 2020 Olympics provides a reason to rejuvenate them.

The beautiful Yoyogi National Gymnasium and its innovative canopy made its architect, Kenzo Tange, a global name. Although

it was developed for watersports in 1964, it has been used for ice hockey and basketball, and is one of the meccas of J-Pop. Now it will host handball in 2020.

When these venues were built, they were sorely needed.

The city was rapidly growing and modernising. Many have survived for almost 60 years.

The Baji Koen Equestrian Park was built for the 1940 Olympic Games, which were supposed to be held in Tokyo, but didn’t happen for obvious reasons. It’s an 80-year old facility that’s still being used for equestrian events.

Home advantage Harumi Flag is the name of the Olympic Village, which will house 17,000 athletes and team members, and then be sold as apartments. Since the units are designed to accommodate up to eight athletes, with multiple bathrooms, the developers will need to renovate them all before sales start to the public in 2021.

But that’s all baked into the price for the land when it was bought from the government. These will be mass-market apartments, and there’s likely to be strong

demand for them as the city recentralises after decades of suburban sprawl. Harumi Flag is in Chuo City, which has a cap on the amount of housing it permits, as does neighbouring Koto City.

For the middle-class, panAsian buyer, Tokyo is perhaps cheaper than their home market.

Credit is cheaper; construction quality is on par with – if not better – than at home. So there could be strong demand for those Harumi Flag units from overseas buyers as well.

Open to all Away from the Games sites, there’s also been work on “hard” and “soft” infrastructure. The city is fixing on- and off-ramps, providing universal access to all railway stations, creating bicycle lanes and adding greenery.

There’s a big effort to educate taxi drivers in English, and offer language options in the city for Thai, Chinese and Bahasa.

This is against the backdrop of a highly successful national plan to increase the number of foreign visitors to Japan – from 4 million tourists per year in the late 1990s to 31 million in 2018.

Thousands of visitors coming to Tokyo, and millions streaming or watching on TV, will be great for the city. When people see how well the public transport works, how green the city is, the food culture, history, safety and sophistication, it should be a very positive experience. And anything that’s good for the city is good for the property industry.

Daniel Cox is managing director and chief representative – Japan at Grosvenor

OLYMPIC GAINS: TOK YO 2020 IN NUMBERS

43

TOTAL VENUES FOR TOK YO 2020

8

NE W PERMANENT VENUES

25

RE VITALISED VENUES

10

NE W TEMPORARY SITES

2

SK YSCRAPERS OF 50 FLOORS BUILT AF TER THE GAMES

5,650

RESIDENTIAL UNITS FOR SALE OR RENT AF TER THE E VENTS

Q3 2019 / MODUS APAC / 11

THE PRIDE OF ASIA PACIFIC The RICS Awards have been honouring the most transformational individuals and initiatives in the land, real estate, construction and infrastructure sectors across the region, from Australia and New Zealand to – for the first time in 2019 – Southeast Asia.

Congratulations to all of this year’s winners.

SOUTHEAST ASIA WINNERS BUILDING CONSULTANCY & PROJECT MANAGEMENT TEAM OF THE YEAR CBRE AGENCY TEAM OF THE YEAR JLL Singapore QUANTITY SURVEYING TEAM OF THE YEAR Perunding Kos T & K Sdn Bhd (PKT) INNOVATION AWARD Arcadis VALUATION TEAM OF THE YEAR CBRE PROPERTY MANAGEMENT TEAM OF THE YEAR CBRE SUSTAINABILITY AWARD C&W Services Singapore FACILITIES MANAGEMENT TEAM OF THE YEAR JLL Singapore

YOUNG ACHIEVERS OF THE YEAR Armelle Le Bihan, Green Building Consulting & Engineering; Benjamin Towell MRICS, Building & Construction Authority CONSTRUCTION PROFESSIONAL OF THE YEAR Eugene Seah FRICS, Surbana Jurong WOMAN OF THE BUILT ENVIRONMENT AWARD Esther An, City Developments LIFETIME ACHIEVER AWARD Seng Joo How MRICS, CPG Facilities Management PROPERTY PROFESSIONAL OF THE YEAR Cheng Su Chen FRICS, C&W Services Singapore

IMAGE BY NIGEL YOUNG/FOSTER + PARTNERS

RICS AWARDS 2019

RICS AWARDS 2019

(From far left) CBRE’s property asset management team at South Beach in Singapore compiled an extensive report on the development’s sustainability features; Beca and JLL won for the Aotea Centre refurbishment programme in Auckland; JLL’s collaboration with Suncorp to secure the latter’s new HQ in Brisbane was praised by the judges

NEW ZEAL AND WINNERS

AUSTRALIA WINNERS

BUILDING CONSULTANCY & PROJECT MANAGEMENT TEAMS OF THE YEAR Beca; JLL

CONSTRUCTION PROJECT MANAGEMENT TEAM OF THE YEAR JLL

PROJECT MANAGEMENT & BUILDING CONSULTANCY TEAM OF THE YEAR JLL

BUILDING CERTIFICATION TEAM OF THE YEAR Building Approvals and Advice

AGENCY TEAM OF THE YEAR Colliers International

YOUNG ACHIEVERS OF THE YEAR Peter Hamilton, CBRE; Nick Hooper, Colliers International

AGENCY TEAM OF THE YEAR CBRE

PROPERTY FUND OF THE YEAR Quintessential Equity

CONSTRUCTION PROFESSIONAL OF THE YEAR Gerard Ball, Babbage

INNOVATION AWARD CBRE

QUANTITY SURVEYING TEAM OF THE YEAR AECOM INNOVATION AWARD Bank of New Zealand VALUATION TEAM OF THE YEAR JLL PROPERTY ASSET MANAGEMENT TEAM OF THE YEAR Colliers International CORPORATE REAL ESTATE ADVISORY TEAM OF THE YEAR Colliers International

WOMEN OF THE BUILT ENVIRONMENT AWARD Gwendoline Callaghan, Colliers International; Bridget Fowler, CBRE

QUANTITY SURVEYING TEAM OF THE YEAR Xmirus VALUATION TEAM OF THE YEAR JLL PROPERTY MANAGEMENT TEAM OF THE YEAR AXA Investment Managers CORPORATE REAL ESTATE ADVISORY TEAM OF THE YEAR JLL

YOUNG ACHIEVER OF THE YEAR Patrick Burke, JLL CONSTRUCTION PROFESSIONAL OF THE YEAR Michael MacCulloch, JLL WOMAN OF THE BUILT ENVIRONMENT AWARD Lizzie Cox, Watpac LIFETIME ACHIEVEMENT AWARD Bob Richardson FRICS, Xmirus

LIFETIME ACHIEVEMENT AWARD Clive Fuhr FRICS, Panuku

SUSTAINABILITY PROJECT OF THE YEAR CBRE

PROPERTY PROFESSIONAL OF THE YEAR Campbell Stewart, CBRE

For more awards coverage, including winners’ photos, go to rics.org/seaawards; rics.org/nzawards; and rics.org/auawards Q3 2019 / MODUS APAC / 13

T H E

C O A S T A L

E R O S I O N

C O N U N D R U M

WORDS BY JOHN VIDAL

CONSERVATION

Development on the shoreline pits the irresistible force of the sea against the immovable object of steel and concrete – and it’s a fight neither side is winning

D

awlish Warren beach in south Devon is one of the most popular in Britain.

Thousands of holidaymakers head there each year to enjoy its golden sands and pristine waters. But although the shoreline looks natural, it is, in fact, artificial. Since mid-Victorian times, when Isambard Kingdom Brunel engineered a railway line along this stormy, wave-lashed stretch of coast, people have tried to“defend” Dawlish and its beach from the sea with ever more elaborate projects.

The original sea wall of 1843 has been heightened and strengthened at least four times, and wooden groynes, breakwaters,

stone revetments, concrete and steel gabions and rock “armour” have all been deployed to stop the beach eroding, the cliff crumbling and houses flooding.

By the early 2000s, Dawlish’s famous sands were disappearing, leaving rock pools and shingle in places. The foreshore was much lower and narrower than it had been, and waves were frequently topping the sea wall during strong winds and high tides.

Disaster struck on 4 February 2014, when storms dramatically collapsed the railway line that runs atop the wall, battering the defences and forcing evacuations. The government put up £35m for repairs to the

track, and £14m for stronger beach defences.

Higher, stronger concrete walls, longer timber groynes and breakwaters and a new 460m sandbag defence were constructed. In addition, 250,000 m3 of sand was dredged from the nearby Exe estuary and pumped on to the beach, raising it 3m in places.

But five years on, the problem is far from being solved. Storms again washed away much of the sand last year, and new plans to raise the sea wall a further 2.5m to 7m were submitted in February this year.

“It’s still a beautiful beach, though. It’s possible much of the sand will return over time”, says an optimistic Suzanne Papanicola, Q3 2019 / MODUS APAC / 15

situation in the US, where beachfront developments mushroom and engineers lock cities into expensive projects to continually strengthen their defences.

The only solution, he says, is to move development back from beaches altogether: “In its efforts to hold the shoreline still, today’s society is engaged in a costly and ultimately futile battle. On the one side is the coastal engineering fraternity and on the other the inexorable forces of nature. Many beaches on developed coasts have been transformed into long, thin engineering projects. These strips of sand that we call beaches were once a precious natural environment that has been destroyed in a misguided view of the good of humanity.”

After spending £35m repairing the track at Dawlish in Devon, which was washed away in February 2014, the UK government committed £15m to developing a long-term resilience plan for the vulnerable infrastructure

spokeswoman for the Hazelwood Holiday Park, which lies just behind the beach.

As sea levels rise, storms get stronger and the world’s coasts become lined with development, cash-strapped governments and communities from Spain to Brazil and Australia to California are grappling with what to do with their crumbling sea defences.

The old assumption that stronger, higher walls can hold back the waves is being challenged by marine geologists who argue that building “hard” defences and removing natural barriers such as sand dunes and mangroves leads only to the disappearance of beaches, worse flooding and an endless cycle of expensive repair and reconstruction.

“The sea wall itself is the problem”, says Andrew Cooper, professor of coastal studies at the University of Ulster.“It cannot absorb the energy of the sea. Sea walls cause beaches to steepen, which means that bigger waves

with more energy reach the remaining beach, scouring out the sand and undermining the defences. The more that we build sea walls, the more we destroy our beaches.

“If you build a sea wall to protect the shore, the inevitable consequence over time is that the beach will [eventually] disappear. When you build the sea wall, that is the effective end of the beach”, he adds.

“Sea walls are the deadly enemies of beaches. We are obsessed with building and defending property right next to the beach and trying to hold the beach in place”, says Orrin Pilkey, author, with Cooper, of The Last Beach and professor of earth and ocean science at Duke University.

Pilkey, now in his 80s, has long advocated natural beaches where possible but says that the future of the world’s coastlines is uncertain because the coast is inherently dynamic and changing. He despairs of the

Beach wear The price paid for trying to hold the sea back with steel and concrete is seen all along American, European, Australian and increasingly, Asian coastlines. In Japan, where nearly 40% of the coast is now lined with massive concrete walls to guard against tsunamis, beaches are disappearing at an alarming rate. The government’s Institute for Environmental Studies forecasts that a combination of rising sea levels and sea wall construction threatens to completely wash away 60% of Japan’s sandy beaches.

Some of the worst coastal erosion in Asia is taking place in Vietnam, where developers have rushed to build coastal holiday resorts.

The result, in places such as Unesco World Heritage Site Hoi An, and cities like Da Nang, has been beaches disappearing and defences crumbling, and projected revenue losses to the tourism industry of nearly $30m.

In the US, where the government estimates there are around 350,000 structures located within 150m of the sea, nearly 14,000 miles (22,500km) – 14% of the entire coastline – has been fortified with concrete, according to a 2015 report from the Marine Science Center at Northeastern University. What were wide stretches of sand just 30-40 years ago are often now narrow strips of beach sited below high walls. Meanwhile, research published in June 2018 by the Florida Department of Environmental Protection found that almost half of the state’s 820 miles (1,320km) of coastline are now “critically eroded”. Most of the state’s coastline is “defended” behind sea walls, which are partly responsible for the beaches’ disappearance.

The worldwide response to eroding beaches has been to replenish them with dredged sand. This temporarily widens them and maintains beachfront property values,

IMAGES BY GE T T Y; NE T WORK R AIL

Among the proposals for Dawlish is a new sea wall, 2.5m taller than the present one, plans for which were submitted in February 2019. How long term a solution this is, both for the beach and the railway, remains to be seen

but is expensive and must be done frequently.

Beach “replenishment” is now a booming global industry, with one academic study suggesting $100bn a year is spent restoring US beaches alone. Hundreds of US barrier islands off the coasts of North Carolina, New Jersey, Texas and Florida now need massive, regular supplies of sand. On Galveston Island in Texas, the beach has been raised up to 5m, and the ground floors of some buildings have been turned into basements.

Many cities now replenish their beaches every year to keep the tourist industry alive.

California is estimated to have pumped 300m m3 of sand on to its beaches over the past 30 years, and Florida 230m m3. But as storms increase and demand for sand grows, the cost of replenishment is spiralling. The wealthy residents of Malibu’s Broad Beach in California received approval last June to add 300m m3 of sand to their short length of

coastline at five-year intervals for the next 20 years. It is expected to cost them $31m.

They might be wasting their time.

Geologists warn that sand replenishment actually worsens the erosion. “These artificial beaches usually erode at least twice as fast as natural beaches and can only ever be a temporary solution. As time goes on and as the sea level rises, the interval of replenishment will get shorter because the beach becomes less stable,” says Cooper.

“Beach replenishment is only a plaster that must be applied again and again at great cost. It doesn’t remove the problem, it treats the symptoms. Eventually and inevitably beach replenishment will stop, either as sand or money runs out.”

Replenishment also smothers all life on the beach, adds Pilkey. “The near-shore food chain that originates with the tiny organisms living between grains of sands

and surviving on occasional influxes of seaweed is now gone. The whole ecosystem is out of whack. Habitats for turtle and bird nesting are being destroyed.”

The powerful American Shore and Beach Preservation Association (ASBPA), the leading advocate of beach replenishment, condemns both sea walls and letting nature take its course. “Centuries of coastal development and engineering coastlines and inlets have caused much of the coastal erosion we see today. Sea-level rise will only make this worse. There is no way to now let nature take its course without reversing the events of the past 300 years,” says ASBPA director Derek Brockbank. “Replenishing the sand that is lost is a critical tool to maintaining healthy coastlines. It costs money, but it is preferable to the cheaper – but ecologically destructive – alternative of building sea walls to protect coastal property.”

Q3 2019 / MODUS APAC / 17

CONSERVATION

WILL TRUST IN NATURE PAY OFF? The UK’s biggest coastal landowner has decided to work with the tides, not against them The National Trust, Britain’s greatest coastal landowner by far with more than 780 miles (1,255km) of mostly wild shoreline, is one of the world’s leading advocates of letting nature take its course.

“Hard coastal defences such as concrete walls have major drawbacks and a limited lifespan.

They will be increasingly prone to failure,” says Phil Dyke, the Trust’s coastal and marine adviser. “As they fail we need to make decisions about whether to replace them. We must also acknowledge that sea defences often cause unwelcome side

effects, such as beach lowering in front of sea walls.”

The Trust has more than 80 coastal sites experiencing rapid erosion, many with historic structures that are likely to be lost to the sea in the next 50-100 years. The answer, it says, is not to try to protect them behind high sea walls but, wherever possible, to let the sea create new wetlands, salt marshes and habitats. It also proposes moving buildings such as cafes, beach huts and even homes back from the coast.

“For many years, the default response to flooding and

erosion along the coast has been to ‘hold the line’ and build our way out of trouble.

The assumption was always that we could engineer solutions.

[But] this endless cycle of ‘construct-fail-reconstruct’ makes little sense,” Dyke argues.

“Increasingly we must view adaptation as having an equal role in the long-term health of the coastline. We are not against coastal defences, but they are not appropriate to us. They are very important for towns and cities but the way they are funded [by government] is that every £1 spent on sea

defences has to demonstrate it can protect £8 of assets.

This means there’ll be a lot of small coastal communities where the numbers don’t add up”, says Dyke.

“There is far better understanding of coastal processes compared with 30 years ago, but the public still expects that sea defences should be hard engineered.

“Progress is still equated with hard defences. It is quite understandable”, he says. But, Dyke adds, coastlines were never intended to be static, and new thinking is needed.

CONSERVATION

IMAGES BY AL AMY, ©TADA SHI ONO / L A VILL A KUJOYAMA

British beaches are some of the most heavily eroded in the world. Government subsidies to maintain hundreds of miles of sea walls, groynes, artificial beaches and breakwaters cost more than £750m a year.

But this has not stopped flooding, or beaches in places like Ventnor on the Isle of Wight, Lowestoft in Suffolk and Aberystwyth in Wales being eroded. The Welsh Environment Agency calculates that there are 220,000 properties, housing 357,000 people, at risk of flooding in Wales. Just to maintain this level of risk would require spending on defences to be tripled in the next 15 years.

That’s ecological Increasingly, an ecological mindset is being adopted. “The traditional approach of engineered sea defences locks us into ever increasing costs of replacement and maintenance. The alternatives are naturebased solutions to flooding and erosion, which work with natural processes to reduce flood risk and incorporate ecosystems into flood defence”, says Iris Möller, deputy director of the University of Cambridge’s Coastal Research Unit. “Rather than seeing the coast as a static line, these alternatives rethink coastlines as zones with valuable habitats such as beaches, dunes and wetlands that act as carbon stores, places for recreation and natural buffers against the waves”.

Möller cites the Royal Society for the Protection of Birds’ flagship Wild Coast Project at Wallasea Island in Essex, which has restored 1,655 acres (670ha) of land that had been reclaimed for agriculture years earlier back to salt marshes and lagoons. “The tide and waves now regenerate salt marsh where it had been embanked and drained. If designed well, such schemes create new habitat which can reduce the height and intensity of storm surges and lower flood risk.”

It is now UK government policy to manage coastal retreat, sacrificing land to the natural process. With hard defences costing as much as £10,000 a metre, and beyond the means of local authorities, sea defences along more than 80 miles of Britain’s east coast and much of west Wales may not be maintained within a few decades. As a result, it is likely that hundreds of homes, nature reserves, valuable agricultural land and even villages will be lost to the sea over the next 50 years.

“We are just one of about 50 communities on the Welsh coast which expects to be abandoned,” says Matt Burrows, a flood monitor volunteer in Fairbourne, Gwynned.

“The village has a low, deteriorating sea wall and it needs to be at least 2ft higher. The sword of Damocles hangs over us. In about

To protect against tsunamis, nearly 40% of Japan’s coast is now lined with huge concrete barriers. As well as being a blight on the landscape, the walls are also contributing to the washing away of the country’s beaches

five years’ time they will stop improving the defences here and the government will start to let the village of about 400 houses go back to the sea. We are fighting the decision on every front but we are not winning yet.”

Abandoning farmland and communities to the sea is expected to be emotionally traumatic but it is necessary on economic and ecological grounds, argued the UK parliament’s committee on climate change in its October 2018 report, Managing the coast in a changing climate: “Building ever bigger defences to protect all coastal communities in the future would be prohibitively expensive. It would also detract from the coastal landscapes that people treasure and further interfere with the coast’s natural adaptation to sea-level rise. Facing up to inevitable change requires difficult decisions.

“At risk are not just beaches,” says the committee, “but 7,500km of road, 520km of

railway line, 205,000ha of good, very good or excellent agricultural land, and 3,400ha of potentially toxic historic landfill.”

“Sea walls used to be the big thing in the toolbox. But we know flooding will get worse.

On current sea-level rise projections, sea walls that are waist high now would have to be head high by 2100 and about 18ft high by 2200. Long-term thinking is needed,” says Hamish Hall, a director at global engineering consultant WSP.“I’d like to see sea defences set right back. We have a mentality to just rebuild everything after a storm. The simplest solution would be to move the infrastructure back. The problem is the obsession with building property right next to the beach, and with trying to hold the beach in place.”n How do we ensure our built assets are more closely attuned with the natural environment?

Find out more at rics.org/naturalenvironment Q3 2019 / MODUS APAC / 19

RESILIENCE

FIT FOR THE FUTURE? 能否适应未来?

WORDS BY ALEX FREW MCMILLAN ILLUSTRATIONS BY BRAD CUZEN

Developers are now starting to factor change – be that societal, environmental or technological – into their project pipelines.

But what about existing buildings? Can you retrofit resilience?

M

ichael Bloomberg knows a thing or two about investing. The billionaire made the world’s ninth-biggest fortune selling trade-worthy data to the financial sector. Then he helmed City Hall at capitalism’s heart a few blocks from Wall Street for three consecutive four-year terms.

Bloomberg sees resilience – in real estate terms – as an investment opportunity.

That much is clear from the results of the taskforce that he chaired on climaterelated financial disclosures. In 2017 it delivered this verdict: investors providing long-term financing need to consider the resilience of their strategies and capital spending, as much as any developer of “long-lived fixed assets” needs to consider the resilience of the stock that they construct.

Business resilience and climate resilience now rank among the top key risks cited by investors and property owners alike. But the Bloomberg panel also lists resilience and resource efficiency as opportunities to offset acute or chronic physical risks. Ultimately this confluence feeds into financial impact, running through cashflow to the bottom line.

There are signs the industry is catching on.

GRESB, which assesses the sustainability of real estate investments, notes that some developers are converting demand for resilience from investors, occupiers and governments into a competitive advantage.

They provide risk management and resilience assessments during competitive bids and when raising capital, or promote features that differentiate their properties, such as back-up power generation and flood-resistant design.

发展商已开始在其新项目中考虑 社会、环境或科技变化，但对于 现有建筑物而言，能否通过翻新 改造来适应新环境?

亿

万富翁迈克尔·布隆伯格(Michael Bloomberg)对投资略有心得，通过 向金融界出售有交易价值的数据， 他名列全球富人排行榜第九位，更成为纽约 市市长，入主华尔街附近的市政厅并连任三 届，每届任期四年。 房地产方面，布隆伯格先生将适应力视为 一种投资机遇，从他主持的与气候有关的财 务披露工作组的结果中可以清楚地看到这 一点。2017年，该工作组发布以下结论：与“ 长期固定资产”发展商考虑建筑物的适应力 一样，提供长期融资的投资者也必须考虑 其投资策略和资本支出的适应力。 目前，投资者和产权所有人均将商业适应 力和气候适应力视为主要风险，但布隆伯格 工作组认为适应能力和资源效率为抵御突 发或长期实际风险提供了机会。这种状况会 对财务构成影响，并成为现金流的一部分。 有迹象显示业界正在努力作出补救。评估 房地产投资可持续性的组织“全球房地产可 持续标准”(GRESB)表示，有些发展商将投资 者、业主和政府在适应能力方面的需求转化 为竞争优势，在投标和筹集资金时会提供风 险管理和适应能力评估，并且宣传自身物业 的独特性，例如备用发电设施和防洪设计等。 适应能力主要是从气候变化或资源利用 效率的角度考虑，对社会转变、人口增长或 收入不均等非实质风险则较少评估。此外， 干旱和贫穷等长期的“压力因素”难以评 估，间接破坏事件也不容易评估，例如其他 地区发生的恐怖袭击造成的航空交通中断、 生物冲击或殃及邻近城市的未遂事件等。

消除压力 澳大利亚发展商Lendlease尝试在其位于悉 尼的Barangaroo South 开发项目（现在是其 总部所在）解决这些问题。悉尼大学心理学 家的研究表明，这座建筑物的内部空间对于 员工及其友好，设计也旨在鼓励进行“轻松 随意的会谈”。该项目致力于实现碳中和、 节水和零废物。由于澳大利亚面临日益严峻 的风暴和丛林大火问题，因此该建筑物本 身，在与其他建筑物、道路和公用设施的关 系方面都考虑到未来的气候事件。开发该建 筑物时也关注了对居民、游客和工人构成的 社会压力，并制定相应的气候变化和社区计 划以提高适应能力。 太古地产在2018年针对其旗下物业资产、 在中国大陆和香港的业务、以及总值10亿美 元的迈阿密Brickell City Centre综合体开发 项目推出了一项全面的气候变化风险研究， 目的是辨识商机和风险，并根据短期和长 期本地化气候数据模拟突发和长远债务。 Q3 2019 / MODUS APAC / 23

Resilience is often viewed primarily in terms of climate change or the efficient use of resources. There are far fewer attempts to assess non-physical risks, such as exposure to social change, population growth or income inequality. It is also hard to assess long-term “stressors” that are chronic conditions such as drought or poverty, as well as the impact of indirect disruptive events such as a terrorist attack elsewhere that grounds air traffic; biological shocks; or near misses that affect neighbouring cities.

Stress buster The Australian developer Lendlease has attempted to address these points at its Barangaroo South development in Sydney, now its headquarters. The interior space is notably employee friendly and designed to encourage “serendipitous ways of meeting”, according to a study by University of Sydney psychologists. The project is committed to achieving carbon-neutral, water-positive and zero-waste status. It also anticipates future climate events in a land known for increasingly intense storms and bushfires, not only in its construction but also its relationship to other buildings, roads and utilities. It has looked at social stressors, too, for residents, visitors and workers, creating a climate change and community plan devoted to adaptation and resilience.

Swire Properties in 2018 launched a comprehensive study of climate-change risk for not only its property assets but also its business operations in Hong Kong, mainland China and at its $1bn Brickell City Centre mixed-use development in Miami. It sought to identify business opportunities as well as risks, modelling its own acute and chronic liabilities alongside localised climate data, for the short and long term.

Swire plans to use the results of this“deep physical risk analysis” to develop an action plan to mitigate risks and build resilience across its portfolios. It also has an enterprise risk management system for climate and water-related risks, and at the start of 2018, it issued its first “green bond”, generating $500m to fund or refinance green initiatives.

Assessors and property owners beware.

Valuations are knocked down by a discount of 7% on properties that are already exposed to sea-level rise, compared to less-exposed properties, as shown by a study from the University of Colorado at Boulder and Penn State. No surprise, then, that investors are shying away from risky coastal areas, and even expressing concern about inland cities

with climate risk. But the Bloomberg panel also notes infrastructure, land and buildings that plan for business and climate resilience benefit from increased market valuations.

These are not far-fetched, distant problems. Globally, 35% of the properties owned by real estate investment trusts (REITs) are already exposed to climate hazards, according to a report by real estate data aggregator Geophy and Four Twenty Seven, which provides climate-change risk analysis for financial markets. The funds run by developers in Japan, Hong Kong and Singapore are particularly vulnerable.

Cheung Kong Property Holdings, Mitsui Fudosan and Sumitomo Realty & Development top the “who’s who” with climate risk red flags on their properties.

More than 25% of Sun Hung Kai Properties’ $56bn portfolio is exposed to sea flooding.

太古地产打算根据这项“深入实质风险分 析”的结果制定行动计划，为各项业务缓减 风险及建立适应能力。另外，该集团亦就气 候和水源风险制定一项企业风险管理计 划，并在2018年初首次发行“绿色债券”， 集资5亿元为绿色计划融资或再融资。 评估员和业主要提高警惕。科罗拉多大 学博尔德分校及宾夕法尼亚州分校进行的 一项研究显示，已受海平面上升影响的物业 估值比受影响较少的物业低7%，因此投资 者自然纷纷规避高风险的沿海地区，甚至对 有气候风险的内陆城市也有所担忧。不过， 布隆伯格工作组表示，基础建设、土地和建 筑物若制定商业和气候应对计划，市场估值 亦会上升。 以上问题并不遥远。为金融市场提供气候 变化风险分析的房地产数据整合公司 Geophy and Four Twenty Seven发表的一份 报告显示，全球由房地产投资信托拥有的物 业中有35%已面临气候威胁。日本、香港和

RESILIENCE

“ A BUILDING IS A CARBON FOOTPRINT, SO A GREEN BUILDING IS ONE THAT MAKES THE FOOTPRINT SMALLER ” DARYL NG SINO L AND

Although these are big, global problems, solutions come first on a small scale.

The Hong Kong-based developer Sino Land is looking to uncover new ways of running an old-fashioned business at its Sino Inno Lab. The initiative sponsors 45 proptech companies, much of whose work is displayed in a 3,000 ft2 incubator in the gritty industrial neighbourhood of Kwun Tong, where there’s a mock apartment, kitchen, bathroom and hotel room.

The lab has also welcomed 2,400 guests since it opened in October 2018, many of them trade groups but also competitors such as Sun Hung Kai, Henderson Land and the Shui On Group. All groups are welcome to give their backing to any of the companies.

Promising technologies also get a test contract to apply their work in a real-world Sino project. One of those candidates is a

“smart film” that can render a window opaque, semilucent or deep grey, reducing solar gain and the need for air-conditioning.

If the company, Film Players, can perfect a totally black filter, Sino will consider removing curtains from some of its hotels.

Daryl Ng, the scion of the Sino family and now deputy chairman, says developers have an obligation to run their portfolios as responsibly and sustainably as possible.

“A building is a carbon footprint,” Ng admits while giving a tour of the Inno Lab. “So what is a green building? It’s one where you make the footprint smaller. And a green building is where you are helping the people in it live a healthier, better lifestyle.”

And for Sino, smaller footprints start with small steps. This sultry summer in Hong Kong, a test project has applied Airlite paint to the exterior wall of a warehouse. The paint is designed not only to emit no harmful volatile organic compounds but also to absorb air pollution. Should its porous layers survive Hong Kong’s extreme weather, Sino will apply it in car parks and to the exterior walls of existing buildings, as well as inside new apartments. While at the Tsim Sha Tsui Centre that serves as Sino’s headquarters, lighting, elevators and air-conditioning and heating systems have been replaced with more modern energy efficient models.

“These are easy steps,” Ng says, that pay back in energy savings.

Less intense The property universe tracked by GRESB reduced its average energy intensity by more than 4% in 2018. Indeed, the industry has sustained comparable year-on-year improvements in energy efficiency for more than five years in a row.

JLL notes that “nearly everyone” it interviews cites predictive maintenance, energy management and environmental sensors as smart-building solutions that they have deployed to date. Managers use the data to minimise building downtime and extend the life of property assets, as well as reduce energy and improve occupant health. Sensors in the workplace can generate occupancy “heat maps” to optimise workplace design but also to use in lease negotiations.

But JLL also observes that deploying sensors was the old, tech-focused solution.

That’s no longer enough. Now we must use the data they generate to improve resilience, both for the buildings we occupy, and ourselves. n

新加坡发展商营运的基金尤其受到影响。长 江实业地产有限公司、三井不动产及住友不 动产株式会社旗下物业在受气候风险威胁 方面“名列榜首”。新鸿基地产发展有限公 司总值560亿元的物业之中超过25%会面临 被海水淹没的风险。 这些是全球性的重大问题，但解决问题 可从小处着手。 香港发展商信和置业有限公司正通过其信 和创意研发室，寻求经营旧业务的新方法。 该项计划赞助45家房地产创新科技公司，大 部分工作成果都在位于观塘工业区、面积为 3,000平方英尺的“孵化器”中展出，其中包 含模拟公寓、厨房、浴室和酒店客房。 研发室自2018年10月启动以来已接待了 2,400位访客，其中以贸易团体为主，但也包 括新鸿基、恒基兆业和瑞安集团等竞争对 手。所有团体均可为任何一家公司提供支持。 信和置业还与研发出杰出科技的公司签 订测试合同，应用于信和的实际项目中。其 中一项科技是电膜(Smart Film)，可将窗户 变成不透明、半透明或深灰色，以减低吸收 阳光，节省空调。如果研发电膜的公司Film Players能研发出全黑滤膜，信和置业会考 虑以之取代其部分酒店的窗帘。 信和置业家族事业继承人及现任副主席 黄永光表示发展商有义务尽量以负责任和 可持续的方式经营旗下物业。黄永光带领参 观创意研发室时说： “每座建筑物就是一个 碳足印，绿色建筑减少碳排放，同时为建筑 内的人提供更健康、更美好的生活。” 信和置业从小处着手减少碳足印。今年夏 天香港天气炎热，该集团在一项测试项目中 将Airlite漆油用于一间货仓的外墙。这种漆 油不仅不会散发有害的挥发性有机化合物， 还可吸收空气污染。如果能够证明多孔漆层 可以承受香港的极端天气，信和集团会将这 种漆油用于停车场、现有建筑物的外墙和 新公寓的内墙。信和集团已将总部所在的尖 沙咀中心的照明、升降机和冷暖气系统换上 节能的新系统。黄永光说： “这些措施都很 简单”，但能带来很好的节能效果。 节约 2018年，GRESB追踪的物业将能源消耗平均 减少4%以上。在能源利用效率方面，业界已 经连续五年不断改善。 仲量联行注意到“几乎所有受访者”都表 示目前采用了预测性保养、能源管理和环境 感应器作为智能建筑的解决方案。管理者利 用数据最大限度地减少建筑物的休整期、 延长物业资产的使用寿命、减少能源消耗 并改善用户的健康状况。工作场所的感应器 可以生成活动“热图”，以优化工作场所设 计，并助力租赁谈判。 另外，仲量联行还观察到感应器是侧重 科技的旧式解决方案，已不足以满足目前 的需求。我们必须利用感应器产生的数据 来提高建筑物以及我们自身的适应能力。 Q3 2019 / MODUS APAC / 25

PORT WITHOUT AUTHORITY Maritime infrastructure worldwide requires urgent investment. Can governments attract that money while still keeping control?

INFRASTRUCTURE

H WORDS BY HUGO COX IMAGE BY DAILY OVERVIEW

ambantota in Sri Lanka serves as a cautionary tale of how not to develop an emerging world port. Most of the $1.3bn it cost to build came from Chinese state banks, part of roughly $8bn in development loans that flowed into the country from Beijing following the end of a long and brutal civil war, in 2009.

A Chinese firm – China Harbour Engineering Company, one of the country’s largest – did the work, which was completed in 2010 and formed part of a wider development plan for the sleepy town on Sri Lanka’s south coast, roughly 200km from the capital, Colombo. It was set to include a large industrial zone, an LNG plant, a cement plant, an international airport, a world-class cricket stadium and a tourism centre.

In theory, the port – more than an hour closer by sea than Colombo to the busy shipping lanes that cross the Indian Ocean, connecting Asia to Europe via the Suez Canal – was well placed to take a chunk of the business from the 60,000 or so commercial vessels plying the route. In practice, it was ill prepared to do so. There was no deep-sea port, and firms in Colombo balked at the high costs of relocating, the dearth of domestic cargo and the poor connectivity with the rest of the country. Aside from ro-ro ships – which transport cars and other vehicles that can “roll on-roll off” – which the government forced to divert to the new port from Colombo, the big shipping firms and associated businesses stayed put.

Hambantota’s industrial development had been almost completely neglected, meanwhile.

“It’s not an industrial town. There was a proposal to provide more land to develop processing industries, but the opening of the port was rushed and few facilities were in place. [The Q3 2019 / MODUS APAC / 27

government] had no economic plan to recover the money they had spent,” says Asela Gunatilake, an investment analyst at JB Securities, a stockbroker in Colombo.

In addition, the project was the subject of allegations of corruption, with the New York Times reporting that a government investigation had uncovered payments from the Chinese port construction fund to aides of the then-president, Mahinda Rajapaksa, during the election campaign of 2015. Hambantota was the home province of Rajapaksa, who had engineered the bilateral agreements with China in a tilt away from the country’s historical reliance on India following the war, and many regarded the port development as his pet project.

By 2017, the port was handling roughly one ship a day, a rate that failed even to make the UN’s 40 largest ports list. Fed up with heavy losses operating the port, in the face of swingeing interest rates on the original loans, and in the face of stiff local protests over selling off a key national asset to the mightiest regional power, the new government sold the port to China on a 99-year lease.

The terms were a long way short of favourable, reckons Gunatilake. “We were in this debt trap and desperate for foreign currency,” he says – $5.9bn of foreign loans are due for repayment this year, while Sri Lanka’s GDP is $87bn.“The government had very little bargaining power.”

The Chinese way As China continues to invest in the world’s ports, cases like Hambantota have focused attention on the best way these vital pieces of infrastructure can bring prosperity to the countries in which they are based. In particular, they raise questions of how best to balance the need for private investment – without which development plans will flounder – with the need for national control.

Chinese firms now have stakes in nearly two-thirds of the world’s 50 largest container ports, reports RWR Advisory Group, a Washington-based consultant. The spending is a pillar of its Maritime Silk Road strategy, aiming to link ports in Asia, Africa and Europe that are either funded by Chinese investment, managed by Chinese firms, or both. The sector has taken a decent chunk of the $1.12tr that the country has ploughed into 87 countries across the world since 2013 as part of its Belt and Road Initiative (see opposite). Shipping is the fourth largest investment sector of the plan, consuming more than $75bn.

But those seeking such finance should be aware that their interests and those of their deep-pocketed investors may not be in alignment.

“China is a private party in these deals, more focused on its supply chain than the social and economic side of their investments [for the host]. If they are involved, it’s because they’re interested in [a country’s] natural resources and its ports, and to extract the first via the second,” opines Arènso Bakker MRICS, a port expert from the Netherlands who has worked with the Panama Canal Authority to expand the Panama Canal.

Ports matter in Asia, not least because their neglect is proving a big sticking point in the region’s economic expansion. A 2017 World Bank report noted that, despite

South Asia recording the second-highest economic growth in the world, it was still a relatively small player in world trade. Thanks to the high costs and slow process of getting a shipping container in and out of South Asia, the market commands less than 3% of global container port traffic. If the region’s ports were as efficient as the world’s best, this number would double, the report noted.

Improving efficiency means involving private firms to create a market for services and drive demand, says Bakker. But this requires a delicate balancing act: keep too tight a grip on the ownership and management of a port and private companies will lack the flexibility to shape the services they need to satisfy their customers. Hand away too much control and – as with Hambantota – you give away a key plank of your economic strategy and surrender a key strategic asset.

Reserving the power to shape a port’s development is essential, says Darwin Marcelo, senior infrastructure economist at the World Bank in Singapore, who until recently worked on a trust fund providing finance to developing world ports.

He points to the success of Singapore and Rotterdam, both ports that have prospered despite limitations on their space imposed by the large cities that contain them. The level of forward planning required to provide this type of integrated growth requires “strong government institutions that are technically capable and have low corruption levels” – features which are rare in most emerging countries, he notes. Without the discipline these impose, he says, it is difficult to create the sort of stable incentives – reliable infrastructure, tax incentives and so on – required to attract the private sector.

The spillover benefits from port-mediated trade mean that new ports are often located adjacent to, or within, cities; in such cases both the economic opportunities and the hazards are greater. In the first case, co-location can be essential to a port’s long-term economic impact. Access to the industrial capacity

“ WE WERE IN THIS DEBT TRAP. THE GOVERNMENT HAD VERY LITTLE BARGAINING POWER ” ASEL A GUNATIL AKE JB SECURITIES

INFRASTRUCTURE

ANOTHER NOTCH ON THE BELT

ALL BELT AND ROAD GLOBAL

Despite port transactions representing only a small fraction of China’s

EMERGING WORLD ONLY

total investment in Belt and Road projects, the sector has been the recipient of more than half of all the funding flowing into the initiative.

BELT AND ROAD INVESTMENT IN PORT AND REL ATED INDUSTRY GLOBAL EMERGING WORLD ONLY

$43BN

$70BN

SOURCE: RWR ADVISORY GROUP, 2019

NUMBER OF TRANSACTIONS SINCE JAN 2013 Q3 2019 / MODUS APAC / 29

2,200

1,800

105

71

$1.2TR

$850BN

VALUE OF TRANSACTIONS SINCE JAN 2013

Rotterdam (or anywhere) One group of partners that might help steady the ship when it comes to developing world ports are European operators, who are increasingly competing in the sector.

“They have expertise, not only in how to run a port but in the link between the private and public sectors that can ensure progress on societal challenges such as decarbonisation,” says Isabelle Ryckbost, secretary general of the European Sea Ports Organisation.

The Port of Rotterdam International has owned 50% of Oman’s Sohar Port and Freezone since 2002, in which time capacity has grown from 4m to over 60m tonnes of pass-through cargo a year. Today, 50% of Oman’s trade goes via the port, it has attracted accumulated investment of $23bn and employs 25,000 people.

A long-term government vision has enabled Singapore’s port to prosper despite the surrounding city curtailing its growth (above); a success Hambantota in Sri Lanka has failed to replicate despite not suffering the same limitations (left)

The Omani government has provided the public investment for basic infrastructure such as breakwaters and roads, while the Sohar Port and Freezone has served up customer-related infrastructure such as jetties. Commercial introductions have helped the port develop. René van der Plas, director of Port of Rotterdam International, reckons 10 private firms and entities from Rotterdam now provide port-related services in Sohar, including break-bulk and ro-ro stevedoring, dry-bulk terminal operations and container handling.

As importantly, Port of Rotterdam has provided skills that are being transferred to its government partner.“Initially we held most of the management positions; now most are held by Omani government employees,” says van der Plas.

With Chinese firms active users of Rotterdam’s port, and Chinese investment funding its expansion, van der Plas is keen to defend the country’s record.“I don’t think other countries should be scared of Chinese investment or the involvement of their private companies,” he says, stressing that one declared objective of the Belt and Road initiative is to develop local economies.

However, he concedes that the Hambantota example does little for China’s reputation as a steward in this type of development model.“A lot of infrastructure has been created without ever providing a benefit for the Sri Lankan economy.”

This, he believes, runs contrary to ports’fundamental purpose:“The only reason to start port development is socio-economic value. Of course you need commercial value, too, but if it doesn’t create jobs, education and local growth in balance with the local environment and community, there is just no point.” n Investment in infrastructure to meet growing global demand was a key focus of this year’s RICS’ World Built Environment Forum. Visit rics.org/wbef to find out more

IMAGES BY GE T T Y

that is typically available in a city is a pre-requisite for this. It will help develop a port from a place where boxes are simply shuffled for forward transit – a so-called transshipment port – to one where their contents can be refined or assembled before being sold locally or sent back on their way by sea, which brings larger and longerterm economic benefits.

Bakker points to the example of Tanger-Med in Morocco, where savvy government infrastructure spending helped the port to evolve from the first type of port into the second. “It was initially a transshipment port, with the reshuffling of containers providing few jobs. Now there are several car factories about 50km away and a railway connecting the port to these, so private firms have come, bringing much greater economic benefit to the country,” he says.

In the absence of this type of government planning, haphazard growth among port cities can save up future problems for even profitable ports.

Across Latin America, in locations such as Lima, San Salvador, Buenos Aires and Montevideo, unplanned development has put ports and cities in competition for key infrastructure services – notably transport – and seen cities suffer from pollution and congestion. “As these ports have grown they have overloaded the city infrastructure until the growth of the city has become constrained by the port and vice versa,” says Marcello.

With port authorities in most cases owned by national governments, these problems are exacerbated when the economic benefits of hosting a port are not enjoyed by the host city. In Mombassa, Kenya, the negative impact of the port – noise, pollution and the cost of maintaining the roads under heavy use from lorries serving the port – fell squarely on the city, says Marcello. “The benefits, however, in the form of port taxes and associated revenues, flowed to the Kenyan government.”

The local labour market found itself similarly unrewarded, he says. Private companies operating the terminals and associated facilities favoured skilled labour from abroad for jobs such as operating terminal cranes and warehouse machinery. For unskilled jobs – maintaining the buildings, keeping the facility clean – the national government encouraged Kenyans from other parts of the country to settle in the city.

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N E W W O R L

D

O R D E R E D

PORTRAITS BY JOEL KIMMEL

RICS WBEF SUMMIT

This year’s RICS World Built Environment Forum Summit convened a host of experts to discuss everything from the future of cities to the new face of the workplace. We invited three event speakers to share their views on what lies ahead

1/

OUR CONNECTED FUTURE – AND WHAT IT MEANS FOR CITIES

PARAG KHANNA FOUNDER AND MANAGING PARTNER, FUTUREMAP, AND AUTHOR OF THE FUTURE IS ASIAN

A

sia will be the dominant continent of the 21st century.

As I outlined in my recent book, The Future is Asian, we are already seeing an “Asianisation” of the world, driven by China’s demand for commodities and the continent exporting its people and ideas.

This new civilizational order links 4.6 billion people from Saudi Arabia to Japan, from Siberia to Australia. We are also seeing other emerging markets develop along the lines that we are seeing Asia develop. These concepts can apply just as much to South and Central America or to Africa. They may even ultimately apply to the West.

“Asianisation”certainly presents its own challenges for real estate professionals. The scale of Asian cities is so vast that they present a whole different landscape, literally, from what we’ve seen in the Western world. It’s not unusual for megaclusters of cities to develop in Asia, such as the Greater Bay Area around Hong Kong, Shenzhen and Guangdong, for instance.

The well-developed Asian megacity of the future does not have just one central business district (CBD). It could have four, several city centres, and a network of amenities, infrastructure and services.

It’s a challenge but also an opportunity for the property sector.

It would be healthy for developing nations to evolve along these lines. At the moment, too much focus in many emerging markets is on one city: think of Jakarta, Manila, Bangkok and how they dominate the economies of their home countries. The situation is the same in Africa, around Nairobi, Cairo or Lagos, as well as in Latin America, where Mexico City, Lima, Santiago and Buenos Aires draw the best and brightest to their centres of economic and social activity.

In China, you have a lot more options. You don’t have to live in Shanghai or Beijing any more. As a result, you are starting to see large-scale service economy cities rise in China. People want to have less pollution, less congestion and less stress in their lives. So, places like Changsha and Kunming are also a labour-migration pull.

You have a major conurbation with 100 million people in the 16 cities of “Cheng-Yu”, the combination of Chongqing and Chengdu.

The Greater Bay Area has 62 million souls across nine main cities.

The 31 cities around Wuhan and the middle reaches of the Yangtze River boast a population of 136 million yet are broadly dispersed along spokes connecting those smaller urban hubs.

This, with the right investment, can take place at a smaller scale in other nations. There needs to be a balancing between the most populous and second-most-populous tiers of cities. India is also developing in this direction. Delhi and Mumbai are too large. We are seeing smaller, but still large, economies develop around cities such as Bangalore and Hyderabad, each with a distinct niche, whether driven by tech, a port or an industry cluster. Then you need joined-up thinking at a regional and national level to link them.

This thinking may make you wonder why we would want to live in a city at all. There are good reasons why we don’t work as coders, say, living on a farm in rural Myanmar. You need the ports and the wifi and the fibre, the hospitals, universities and schools and, above all, a diversified economy. It’s hard to do these things outside cities.

I hope that the rise of decentralised economies can help reduce the wealth gap between urban elites and the population as a whole.

Inequality that festers is not going to lead to a bright future. Yet inequality is staggeringly high in many developing counties. That’s not surprising given the breakneck speed of development. But over time there is going to be less tolerance for this inequality.

If we don’t see the kind of dissipation of investment that benefits the whole country, not just the capital cities, that is potentially going to be very negative politically. But I believe that in today’s connected world, we can build toward that optimistic future, successfully.

Q3 2019 / MODUS APAC / 33

2/

MAKING THE SWITCH: WHAT WILL IT TAKE TO TRANSITION TO RENEWABLE ENERGY?

MICHAEL FERGUSON DIRECTOR, ENERGY INFRASTRUCTURE PRACTICE, CORPORATE RATINGS GROUP, S&P GLOBAL

“ RENEWABLES ARE BECOMING CHEAPER, BUT THEY MUST ALSO BE AS RELIABLE AS FOSSIL FUELS ”

T

he task of trying to remove polluting fuels from our energy system has never been simple. Over 20 years after the current series of UN climate change conferences began, the share of global energy consumption provided by fossil fuels remains over 80%, according to International Energy Agency figures.

Global energy consumption has increased by over 45% in the past 20 years, and production of coal and natural gas has risen even faster.

While it’s true that the Trump administration has championed the coal industry, coal is on its way out in the US. To understand the challenge facing energy transition advocates, we must distinguish between the transition from coal and the transition from gas.

In North America today, there are no plans to build new coal-fired power stations and the economics for coal get worse every year. In the parts of the US that operate competitive power markets, coalfired power struggles to compete with natural gas on price. Moreover, the kind of large-scale, constant baseload power that coal-fired generation excels at providing is becoming less important as, in the US and other developed economies, energy-hungry industries are giving way to service industries with lighter electricity demand. As a result, electricity consumption is falling.

In emerging markets, on the other hand, coal is often the cheapest fuel. For growing economies such as India and China, domestic coal production remains an attractive way to sustain economic growth at a price point that most of the population can still afford.

Transitioning from coal, therefore, requires different measures in different parts of the world. Where coal remains competitive on price, natural gas can be a bridging fuel to renewables, replacing coal as the main provider of baseload capacity. Gas-fired peaking plants, designed to respond to urgent demand for electricity in peak periods, are considerably cleaner than coal plants and quicker to start up.

The transition from gas will be harder, not least in the US, which now produces so much gas that it became a net exporter in 2017 and is due to scrap tax credits for renewable energy generation in the coming years. As technology improves, renewables become cheaper, but this alone is not enough: they must also be as reliable as fossil fuels, combining with batteries or other technology able to supply power when wind and solar are not generating. The cost of large-scale batteries needs to fall by about 50% before this can occur.

A cost-effective solution already exists, however, in the form of capacity markets, which sell power capacity to energy suppliers to guard against power outages at peak times. This can be in the form of either increased generation or of reduced consumption, such as a factory that switches off its machinery temporarily when demand is high. Smart grid technology can help to aggregate capacity providers, and schedule power demand – such as for charging electric vehicles – away from peak times. Combining capacity markets with markets for carbon credits could cancel out some of cheap gas’ competitive advantage. Longer term, the most important technological advance in the energy transition will be in battery storage.

There is already no shortage, at least in the US, of people eager to take jobs in the renewable energy industry. But like other industries, this sector will be increasingly driven by automation at all levels, from project origination through design to asset management.

Both industry veterans and new entrants will have to get to grips with the automation, particularly understanding data streams, either by up-skilling or partnering with service providers. The spread of capacity markets could also bring new entrants to the energy industry in the form of heavy-duty industrial consumers. Professionals at these firms who master energy efficiency, data analytics and power trading are well placed to capitalise on the energy transition.

RICS WBEF SUMMIT

3/

WHAT WILL TOMORROW’S WORKPLACE LOOK LIKE, AND WHAT DOES THAT MEAN FOR THE PROFESSION?

“ COMMERCIAL REAL ESTATE WILL, IN TIME, BECOME AN ON-DEMAND INDUSTRY ”

MAUREEN EHRENBERG FRICS GLOBAL HE AD OF DIGITAL FACILIT Y AND ASSE T MANAGEMENT SERVICES, WE WORK

A

s times change, particularly in the context of social and sustainability goals, there has been, and will continue to be, more focus on our footprint within the built environment.

Inefficiencies that weren’t as relevant before are relevant today as the population grows, infrastructure ages and technology continues to advance; people become enabled and choose to be mobile and more flexible in order to adapt.

This adaptability also applies to people’s acceptance of the shared economy, where several organisations can occupy and share one space, dramatically increasing efficiency.

Shared and open seating environments with a managed and facilitated community aspect break down perceived barriers to getting engaged quickly within the culture and work environment.

With an unprecedented number of workers now classifying themselves as freelancers – according to the Intuit 2020 Report, this could be more than 40% of US workers by next year – it is important that corporate real estate and human resource managers work to curate a workplace experience that speaks to their needs.

Comfort, acoustics, natural light and fresh air are the underpinnings of an employee’s ability to function well throughout their working day. For example, if the heating and air conditioning is not designed properly, first there is a comfort issue and also there is an issue about the amount of time spent trying to control it. Comfort is a big factor in people’s ability to focus on their work and has a significant effect on employee productivity.

Dr Joseph Gardner Allen, assistant professor of exposure assessment science at Harvard’s TH Chan School of Public Health, has conducted research that found workers in properly ventilated buildings performed twice as effectively on cognitive and decisionmaking tests compared with those in poorly ventilated buildings.

Therefore, it is important to consider indoor environmental quality and its impact on health and productivity. Often this is just an afterthought, yet the results of Allen’s studies suggest that even a modest improvement to indoor environmental quality may have a profound impact on the decision-making performance of workers, and their productivity in general.

The bottom line is that you can design as cool a looking space as you like, but if you don’t get the inner workings right first, you will fail to achieve an optimised, productive work environment.

To get the right solution for large corporate enterprise clients, we spend a lot of time sitting with their real estate group and different stakeholders in the business to observe the ways in which they work and to determine what is and isn’t working for them. We consider usage data, work movement patterns, conduct research and undertake surveys to ensure we’re giving insights-driven recommendations.

Over the next five years there is going to be more variation of the space that is offered by owners to occupants. Real estate will, in time become an “on-demand” industry and landlords will be able to build and provide for space as a service.

Now is an incredibly exciting time to be working in commercial real estate as it is moving forward, being transformed by technology, society and work. This change is advancing very quickly and drawing in new thinking and professionals with new and different skill sets creating alternative ownership and business models and advanced workplaces, no longer just places where work happens.

Seeing things differently, challenging old models, bringing in new skills and creating platforms and products that can be consumed in various ways by tenants and workers will mean the difference between success and failure in property in the coming years. n The opinion pieces in this article have been abridged for publication in Modus APAC. To read the full versions, visit rics.org/futureprofession

JOIN THE 2020 SUMMIT The next RICS World Built Environment Forum Summit will be held in Shenzhen, China, on 11-12 May 2020, and will focus on the theme of “Successful city clusters: wealth creation, resilience and great places to live”. To find out more, sign up for email updates and to get involved, visit rics.org/wbef Q3 2019 / MODUS APAC / 35

BUILDING BLOCKS Tokenisation promises to turn the notoriously illiquid asset of property into highly tradeable digital shares. Is it too good to be true?

WORDS BY STUART WATSON ILLUSTRATIONS BY MIKE LEMANSKI

O

n a trip to New York a businesswoman from Singapore passes a strikingly designed new office building. Her curiosity piqued, she uses an app on her phone to download information on its occupants, rent roll, environmental performance and return on capital. Later, after perusing the data again in the Starbucks on the opposite side of the street, she comes to a decision and purchases $10,000 of shares in the block through an online exchange. With a smile of satisfaction, she returns to sipping her flat white.

Imaginary scenarios such as this inspire the pioneers of tokenised real estate investment, and recent months have seen the industry in the US take its first baby steps towards turning the fantasy of easily traded fractional ownerships in real estate into reality. In October 2018 the owners of the luxury St Regis Aspen Resort in Colorado

sold an $18m share of the hotel in the form of digital tokens, while US tokenisation platform Harbor is offering a $20m stake in a high-end student residence in South Carolina.

Tokenisation is enabled by blockchain technology, which is used to create a digital ownership share, known as a security token (see explainer, p39), and to enable it to be traded cheaply. At present, the market is still in its infancy, admits Ragnar Lifthrasir, president of the International Blockchain Real Estate Association.

“We are at the very early stages of security token offerings,” he says. “We have most of the infrastructure in place to do this – a couple of legitimate companies that can do the tokenisation, a couple of companies that can do regulatory compliance, and a couple of exchanges where you can buy and sell tokens are online, but don’t

TOKENISATION

Q3 2019 / MODUS APAC / 37

“ IF THERE ARE NOT MANY PEOPLE WHO WANT TO BUY THOSE ASSETS, YOU HAVE A HIGHER EXIT RISK ” THOMAS WIEGELMANN FRICS BLUE ASSE T MANAGEMENT

have a lot of traffic. The next stage is rolling this out with real volume. What’s preventing that is that, so far, there has been very little demand.”

Suspicion among professional real estate investors has recently been exacerbated by the deflation of the cryptocurrency bubble, as well as a rash of dubious real estate-related initial coin offerings (ICOs) seeking to raise money for blockchain-related applications. “ICOs really set blockchain real estate back at least a year or two.

They violate the securities laws in pretty much every country, so that is not sustainable for legitimate real estate investors in the long term,” says Lifthrasir.

Among conventional property investors the basic merits of tokenisation are still being questioned: “If you believe the phone and app is the communications media that brings together investment opportunities and the broader market, it is possible that tokenisation is a means of making that investment more practical and achievable,” muses Professor Andrew Baum FRICS, leader of the Future of Real Estate Initiative at the University of Oxford’s Säid Business School.“But it could also be a complete scam that has no longevity at all.

“Anything connected with cryptocurrency and blockchain is highly speculative at the moment, and also unregulated. There is a risk that regulation will come in to nip this thing in the bud or there will be a financial scandal that reduces its appeal to the mainstream.”

The crucial factor that will make or break tokenisation as a concept is liquidity. Real estate is a notoriously illiquid asset class because assets are large and the process of trading them is slow and fraught with paperwork. Tokenisation holds out the prospect of frictionless trade open to both institutions and individuals around the world. However, to make a market there must be buyers as well as sellers.

“There are arguments to say that liquidity might increase significantly, but you could also take the view that it gets reduced,” says Thomas Wiegelmann FRICS, managing director at Munich-based investment manager Blue Asset Management.“If there aren’t many people who want to buy those assets, you have a higher exit risk. The first movers will have liquidity issues.”

Steve Sillam, CEO at Leaseum Partners, which launched one of the first tokenised real estate investment funds at the end of 2018, counters: “You can invest in a fund in which your capital is locked up for five or 10 years or you can invest in a fund where you have liquidity on top of that for the same return, because the tokens will be listed and investors will be able to sell them.”

Leaseum aims to garner $250m from institutional and accredited investors to buy commercial property in New York City, and while Sillam admits some are deterred by tokenisation, he is still bullish about the prospects for capital-raising: “Because of their strict investment criteria, institutional investors in the EU are not allowed to touch any tokenised fund, but it is not the same story in Asia, where institutional funds are more tech-friendly.

Most of our potential cornerstone investors are from Asia. Family offices that have traded cryptocurrency before have been responsive as well,” he claims.

It is a start, but for large institutional investors $250m is hardly a significant sum. While he is optimistic about future prospects, Lifthrasir believes it may be five years before a tokenised market is properly entrenched.

What is the catalyst that could propel tokenisation into the mainstream? A first big vote of confidence from within the property establishment would help, suggests Nick Wright, a London-based proptech consultant and director in CBRE’s strategic consulting team: “It would work if you were to tokenise something really significant – it would need a Broadgate or a Walkie-Talkie [City of London office schemes], something that has value and will hold it over a long period of time.”

He argues that some of the technological building blocks needed for tokenisation to take off are still lacking, including a digitised land registry and much more detailed information on building performance. However, he speculates that if those conditions are fulfilled then some market trends could play in favour of tokenisation.

“If the valuation model changes then perhaps tokenisation starts looking more interesting,”he says.“If landlords are providing services to occupiers and tenants on more flexible terms, that generates a different kind of income to a traditional lease, and if data about the operational income is available then I think that will make tokenised real estate more attractive to investors.”

The first seeds of real tokenisation have been sown, but as with all nascent technologies, the form into which they will grow in the long run is near impossible to predict. In the meantime, property industry visionaries will continue to dream of a truly global and democratised market in real estate tokens. n Blockchain and tokenisation was one of the key discussion points of this year’s RICS World Built Environment Forum Summit. Discover more at rics.org/unlockingblockchain

Security tokens are a digital wrapper for a traditional private security. In real estate terms that means they represent a share of a property, and/or an interest in the dividend produced by that property. Unlike other digital tokens they are designed to comply with existing securities regulations, and if their use becomes more widespread some think the ease with which they can be traded could enable a broader, more liquid market for real estate investments.

High grow th: 20%-30% adoption

PL ATEAU OF PRODUCTIVIT Y

Third-generation products

SLOPE OF ENLIGHTENMENT

Methodologies and best practices developing Second-generation products

TROUGH OF DISILLUSIONMENT

Negative media

Technology/infrastructure hurdles Less than 5% adoption CRE CRYPTOCURRENC Y TR ANS AC TIONS

GLOBAL PROPERT Y SE ARCHES

Mass media hype

CRE SMART CONTR AC TS

WHAT IS THE DIFFERENCE BE T WEEN A COIN OFFERING AND A SECURIT Y TOKEN?

PEAK OF INFL ATED EXPECTATIONS

Initial coin offerings (ICOs) are the cryptocurrency equivalent of the stock market initial public offering (IPO).

Companies looking to create a new service, app or coin make an online pitch to investors, and backers receive a new cryptocurrency token specific to the ICO. Hitherto ICOs have been largely unregulated, and start-up businesses have used them to raise capital while avoiding official oversight. Some ICOs have performed well, providing exceptionally high returns, but frauds and scams designed to fleece incautious investors are common.

E XPEC TATIONS

WHAT IS AN ICO?

TECHNOLOGY TRIGGER

Cryptocurrencies are digital tokens for exchange in online transactions based on blockchain technology.

TOKENIS ATION

First-generation products

IS IT THE SAME AS CRYPTOCURRENCY?

TITLE AND L AND REGISTRIES

Early adopters investigate

Blockchain is based on a new form of database, the distributed ledger. Each transaction is recorded in the ledger in an encrypted form as a “block” of data, and the ledger is distributed across many different computers in a network of “nodes”. Because it is decentralised, blockchain offers the potential for transparent, incorruptible peer-to-peer digital transactions without the time-consuming need for permission or validation from a third party.

SUPPLY CHAIN MANAGEMENT

HOW DOES BLOCKCHAIN WORK?

A S SE T MANAGEMENT

TOKEN EXPL AINER

DUE DILIGENCE

TOKENISATION

TIME

DON’T BELIEVE THE HYPE… YET? Every new technology has its ups and downs before taking off, and this journey can usually be plotted against the popular Gartner Hype Cycle visualisation. Here’s how Cushman & Wakefield’s 2018 analysis places the latest crop of blockchain-related commercial real estate applications Q3 2019 / MODUS APAC / 39

This is Tokyo’s solution to the problem of flooding. It’s a dramatic example of how the built environment can help us adapt to – rather than struggle against – a world in which unwanted but more frequent influxes of water will become a way of life. But it’s not the only solution, as Robyn Wilson explains

W AT E R W O R L D

FLOODING

Q3 2019 / MODUS APAC / 41

Tokyo’s “floodwater cathedral” regulates overflow from the city’s smaller rivers, and pumps it out at a rate of 200 tonnes per second

JAPAN “ FLOODWATER CATHEDRAL” REPAYS TOK YO ’ S FAITH IN ENGINEERING SOLUTIONS

T

he vast underground network of tunnels and pillars that lie 50m below Tokyo’s surface are a flood control system like no other. Completed in 2006, this mammoth ¥221bn ($2.04bn) scheme protects the Japanese capital from being inundated during heavy rains, which is no easy task when you consider how vulnerable the low-lying city is to such events.

The Tokyo Metropolitan Government’s latest flood map risk assessment puts one-third of the city within a risk zone, which is why it went to great lengths to protect its citizens – 6.3km in fact, comprised of a network of tunnels and chambers 22m beneath their feet. Known officially as the Metropolitan Area Outer Underground Discharge Channel, the scheme works by diverting overflowing river water through ducts, which collect in five massive concrete silos – each big enough to fit the Statue of Liberty inside.

“These are huge reservoirs that can collect billions of gallons of storm water,” says Dr Cecilia Tortajada, a water management expert from Lee Kuan Yew School of Public Policy at the National University of Singapore. She explains how this water then flows through a 10m-diameter tunnel and into a cavernous water pressure regulation tank –an engineering feat of such scale, it has made the scheme world famous. Nicknamed “the floodwater cathedral” on account of its awe-inspiring 59 concrete pillars, each weighing 500 tonnes, the tank regulates the volume of the water and then safely releases it into the Edo river.

Critically, though, Tortajada explains how the regional government has also integrated flood risk training into people’s daily lives to complement the underground defences.“In Tokyo, for example, the government has published leaflets that tell people where to go in the event of a flood, as well as training people from a young age in school,” she says, adding that after years of experience of natural disasters the country has gone to great lengths to learn from its past.

“Japan’s approach is it tries to address what the problems were so next time they don’t happen, both in terms of the infrastructure but also in regard to teaching people,” she says. “When it comes to things like smart cities, we tend to focus on planning and infrastructure and ignore the people. What Japan has done very effectively is train its residents, because cities are built for people, and we forget this in the built environment.”

Although a vital piece of infrastructure today, the project had difficulties getting off the ground due to concerns over its cost, says Tortajada. “But from the moment it was built to now, the amount of floodwater that has come through the system has been such that if you compare the cost of the damages that would have been created within the city then it’s already paid.”

The Building Research Establishment’s (BRE) director for innovation and resilience, David Kelly, agrees, adding that countries around the world should study Japan’s investment track record.

“Lessons can be learned from countries such as Japan, where greater levels of investment in infrastructure and resilience have been deployed for decades, thus delivering greater levels of confidence to the development and insurance industries.”

TOK YO FLOOD IMAGES BY CHRISTOFFER RUDQUIST

For many, flooding has become a fact of life.

Rapid urbanisation and poorly planned development have pushed the edges of numerous cities across the globe into flood-prone areas, leaving them vulnerable to torrential and deadly downpours.

What’s more, these problems show no signs of abating. In fact, a recent report on global warming by the Intergovernmental Panel on Climate Change suggests they will only worsen in the years to come.

Finding innovative solutions to the “new normal” of flooding, then, has never been more pressing, and an increasing number of countries are looking to the built environment to help them find the answers.

We’ve profiled three projects from around the world that are implementing a series of anti-flood measures – from innovative architecture and materials, to smart design and construction – to tackle the issue head on.

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CHINA

“Sponge City” initiatives such as artificial ponds, wetlands and vegetative buffers have helped Wuhan, which sits at the confluence of the Yangtze and Han rivers, to mitigate the effects of regular flooding

GREEN THINKING HELPS WUHAN ABSORB IMPACTS OF UNCHECKED URBANISATION

C

hina’s rate of urbanisation since 2000 has been the most rapid that any culture, or any society has ever experienced,” explains Arcadis’ global cities director, John Batten.

“But this urbanisation was carried out in such a way that buffers and green spaces were not incorporated to the extent that they should have. So, what you had was an extreme amount of asphalt, concrete and glass that didn’t allow water to drain naturally into the water table and a lot of Chinese cities, through intensified rain events, would flood.”

Realising the severity of the problem, the Chinese government launched a ¥20.7bn ($3.01bn) “Sponge City” programme in 2015 to undo many of the urbanisation practices that had been put in place. This ambitious project aims to have 80% of the chosen cities constructed to a sponge city standard by 2030. Among the 16 pilot cities selected was Wuhan in the central Hubei province.

With 11 million residents, Wuhan is the most populous city in central China. It’s also one of the most flood prone, lying at the confluence of the Yangtze and Han rivers.

Flooding from the two waterways has been reduced by the construction of levees and upstream reservoirs. However, urbanisation had reduced the retention capacity of the city, resulting in a lack of surface water and green space. So severe was the issue that in 2016 during summer monsoon, torrential downpours killed 14 people in Wuhan, and a further 22 in neighbouring provinces.

That same year Arcadis was appointed to redevelop parts of the city using a series of green infrastructure techniques, with a goal to manage 60% of the city’s rainwater. This involved creating new garden cities, bioswales, artificial ponds and wetlands, as well as vegetative buffers, which increased water re-use and gave space back to the rivers, rather than attempting to fight

against the overflow. Permeable pavements, which allow water to flow through them rather than across the surface, were also installed, as were upgrades to the city’s urban drainage system, water storage and purification facilities.

The programme has also yielded several side benefits, says Batten, the most interesting of which is a drop in temperature during the city’s extremely hot summers.

“By providing green canopies and reusing storm water, the sponge city approach helps to cool the city down.” It has also spurred on developers to start incorporating green vegetation in their buildings as part of “closed-loop water management”, which retains and reuses rain fall from storms.

Batten adds that property values have risen in the sponge city areas of Wuhan as a result of the improvements in green infrastructure, something that he believes can be easily transferred to other flood-prone cities.

Q3 2019 / MODUS APAC / 43

UK STRATFORD-UPON-AVON GOES WITH FLOW AND APPROVES DE VELOPMENT DESIGNED TO FLOOD

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umerous developers had tried – and failed – over the past 15 years to make new development viable at 61 Shipston Road in Stratford-upon-Avon in the UK’s West Midlands. The brownfield site, which backs on to a floodplain for the nearby river, regularly finds itself under water at times of heavy rain fall. The land is classified as flood zone 3, which means it has a greater than 1 in 100 probability of flooding every year.

Still, given that Stratford-on-Avon District Council’s Local Plan requires the construction of 3,500 new homes in the town by 2031, the developer, Holloway Property Development, felt it worthwhile to find a solution. The group appointed Baca Architects, which specialises in building on or near water, to come up with anti-flood designs for 11 new homes. “We design with water in mind from the very beginning,”says Richard Coutts, Baca co-founder and director. “So rather than try to shoehorn water and push it around the development, we embrace that as a constraint from the beginning.”

In practice, this takes the form of elevating the homes on piles to allow flood water to pass underneath them. “If this was to be on a solid mound, then you wouldn’t be able to provide the water storage on site,” explains Coutts. “The way we’ve managed to do that is to take a very gently sloped road from the highway and raise it at a very gentle gradient, into the site. And most of the houses are accessed off that spur.” This enables safe movement in and out of the main properties in the event of a flood and provides level access to most of the plots, which is required by building control.

The team has also connected a raised walkway to a footpath on a historic elevated tramway at the back of the site to provide a through route from Shipston Road, which gives two means of escape where there’s flood risk. Coutts says this will also enable residents to continue with their working day regardless of the conditions.

In addition to the piled construction, removable louvred screens around the base of each dwelling allow water to flow unobstructed, while preventing not only rubbish and debris from washing up under the homes during floods, but also vermin infestations when the waters recede. Permeable paving will then be used on all hard-standing surfaces, with large below-ground storm water tanks that will help reduce pressure on the existing sewerage system.

The designs are the perfect example of how, as the BRE’s Kelly puts it, “new developments should not only reflect the immediate risk but demonstrate creative solutions that mitigate the effects of climate change”. And with the latter becoming an ever-more pressing issue, Coutts believes other flood-prone parts of the UK could use similar techniques to unlock land.

“This is a clear strategy to unlock those brownfield sites located within floodplains or next to rivers to provide homes at the heart of city centres,” he says. “It’s good sustainable development in terms of transport and locating people where the jobs are, but it’s also another way of resisting urban sprawl into the green belt.” n

“ THIS IS A CLEAR STRATEGY TO UNLOCK SITES ON FLOODPLAINS OR BY RIVERS TO PROVIDE HOMES ” RICHARD COUT TS BACA ARCHITECTS

Baca’s plans enable residents to move around the site regardless of flood levels – working with water, rather than trying to resist it

EXPERIENCE

HOW TO…

Futureproof of fice buildings Changing lifestyles, better technology and more enlightened employers are fuelling some big changes in what occupiers expect from their offices. How are property professionals responding to the challenge of ensuring our workplaces are not just relevant today, but fit for the future as well?

THE LATEST TECHNOLOGY FOCUS ON WORKERS ’ IS USELESS IF A BUILDING WELLBEING TO MAKE CANNOT SUPPORT IT BIG PRODUCTIVITY GAINS Tom Redmayne MRICS is a senior director at WiredScore, a digital connectivity rating service

Despina Katsikakis is international partner and head of occupier business performance at Cushman & Wakefield

If you want to ensure your office buildings remain fully flexible and aspirational for the next five, 10 or 15 years, you’ve got to make sure you have the right infrastructure and power resilience in place to support the technology. We help landlords get under the skin of what’s wrong with their buildings and how the situation can be ameliorated.

For instance, the glass that is used in modern construction has been developed for energy efficiency, but has the side effect of blocking mobile phone signals. This will really start to have a user impact with the advent of 5G. Landlords who are prepared for this are already starting to offer “Connectivity as a Service” to their tenants, which not only provides wifi in amenity spaces and plug-and-play internet for the length of the lease, but also dedicated in-building mobile coverage.

There is an even bigger futureproofing story with cloud computing, which enables CEOs to flex their technology and software requirements and, importantly, spend to constantly match their business needs.

Traditionally this flexibility couldn’t be reflected in a CEO’s control of their office space. However, landlords are seeing the benefits of providing space-as-a-service offerings such as business-related amenity space in their buildings, as they enable tenants to become more flexible in how they spend their real estate allocation.

As employers respond to a growing requirement for a work-health balance, there is an increasing focus on wellness in the workplace. We spend most of our time indoors and there’s now much more data on the impact of the physical working environment on wellness and productivity.

Research carried out by Gallup in 2017 linked wellness with high levels of employee satisfaction, and a 21% rise in productivity.

There is also a race to attract and retain talent. If employers are to get the best value from their most valuable assets – 85-90% of operational expenditure is people, after all – then they need to extract the optimum level of performance from them. Factors such as thermal comfort, air quality and good acoustics are key – our data suggests there is a 66% drop in productivity when people are exposed to disruptive noise.

You can promote wellness in the office by encouraging people to use the stairs rather than the lift – at 22 Bishopsgate in the City of London, for example, there is art on the walls of the stairwells. Aside from encouraging different fitness activities, simply improving the ways that people interact can aid wellness. Chiswick Park in west London is a good example of a productive workplace – its buildings face a lake and landscaped gardens, there is retail, a gym, restaurants and a range of pop-up and street food vendors.

INTERVIE W S BY HELEN PARTON; ILLUSTR ATIONS BY BR AD CUZEN

GREEN FEATURES FUTUREPROOF BUILDINGS AND THEIR OCCUPIERS

LONG-TERM SUCCESS STARTS WITH GOOD OFFICE DESIGN

CONSIDER THE WHOLE LIFECYCLE OF THE ASSET FROM THE OUTSET

Daniel Wright MRICS is a senior associate with construction consultant Bruceshaw

Russell Potter is a director of architectural practice Soda Studio

Stephen Shallcroft FRICS is a director at Arcadis and a member of both the RICS FM and IFMA boards

Be it flexible working, wellness, or biophilia – the human need to interact with nature – the greater emphasis that employees are putting on their lifestyles is driving the change in what workplaces provide. It also dictates how landlords will need to respond to occupiers’ preferences in the future.

Whether or not a building is aiming for full LEED or BREEAM accreditation, greening the office for the future and incorporating elements of sustainability or biophilic design are increasingly important to occupiers. Although removing older facades might reduce the internal area of a building, and putting in new air and water filtration systems might be expensive, there are other, cheaper, improvements that can be made. These include installing LED lighting, fitting low-flow taps or more efficiently flushing toilets.

There is also the question of how you can incorporate more outdoor space. Again, there are a few options such as making a ground-floor garden accessible to occupiers, adding balconies, or opening a roof terrace so that staff can have a bit of fresh air.

Increasingly staff are looking for access to local amenities or choosing to work where, for instance, gym membership is offered.

Futureproofing is all about choice. But for this cultural shift to really be effective, the driver must be the actions of those at the top, leading by example.

Our office spaces are becoming quite cool, “Instagrammable” environments.

It’s about centring things on the user and their experience. One of the big shifts we’re going to continue to see is recognising more flexible working patterns.

We recently worked on a project for the Office Group and, because the coworking market is so competitive, our brief was to design-in features that hadn’t been done before. So we incorporated elements such as a wellness room, yoga studio, spaces for meditation, library, recording booths for YouTube, as well as an open-plan ground floor with spaces for eating, meeting, working and events. It was a seven-storey building with a grand, Regency-styled facade, which we contrasted with a minimal and calming interior that was on a more human scale.

Futureproofing is not just about using the latest technology, it’s about having an architecture proposition that gets the basics right and allows flexibility. Even with new-build projects, be prepared for best-laid plans to evolve as it could be up to five years from when drawings are created to when a project is actually built.

We’re very mindful of future trends but, at the end of the day, people just want to be able to open a window or have a real light switch rather than it being controlled by an iPad – keep things simple!

To futureproof our offices, facilities management (FM), real estate and design have got to work together with IT and human resources (HR) departments to flesh out what occupiers require. Clever companies will ask for all those views.

You don’t need to have one workstation per person anymore, and there is the opportunity for space efficiencies, sometimes one-third of the floorplate can be removed, which is a monumental cost saving. This can then be re-invested in more agile ways of working, such as homeworking. Business requirements also have a much shorter time span these days, often of two or three years, and real estate strategies need to accommodate this.

As part of the futureproofing process, we look at the demographics for the average employee, where they commute from and, as certain cities have become more expensive, that has become a factor, too. Our geotech team uses visualisation software to work out where people are going to live in the future to help us narrow down the best location of an office.

At Arcadis, FMs are involved in the design of the buildings, using intelligent building information management systems and other volumetric data sources, which enable us to take into account the running of the building over its whole lifetime. This is not yet a common practice in our industry.

Q3 2019 / MODUS APAC / 47

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Register your interest

Smart and Livable Cities Conference

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Hong Kong Enquiry: Ms Karina Cheung at (852) 2117 0695 or email to kcheung@rics.org

rics.org/smartconfhk

EXPERIENCE

NEWS IN BRIEF

CRUCIAL VOTE FOR GOVERNING COUNCIL MARKET SEATS Elections are coming up for the RICS Governing Council’s 15 geographic market seats, and it is crucial that you have your say.

Our profession needs strong leadership and innovative thinking from the widest range of talent to help us navigate the challenges that lie ahead, from urbanisation through climate change and the digital revolution. The 15 market seats will help ensure that we have a diverse array of voices setting the strategy and direction of RICS. Voting is your opportunity to choose who represents you and your region on RICS’ highest decision-making body. Please make sure you take part, and encourage other members of the profession to vote. For information on how to vote, visit rics.org/elections.

JOIN RICS ’ GLOBAL DATA AND TECHNOLOGY COMMUNIT Y The built environment is rapidly becoming a data-driven sector, and although this presents us with vast opportunities, much of the existing data on real estate is unstructured and often difficult to find and share. To address this issue, RICS has produced a suite of data standards that complement our written standards to support the capture, verification and sharing of data to a common format.

Now, RICS is launching the “Tech Partner” scheme for organisations that are seeking accreditation for implementing our data standards.

The aim is to provide assurance to the marketplace that data used to drive decisions for our clients can be trusted, and to showcase those

EVENTS

third-party software solutions that comply with RICS standards.

The Tech Partner programme sits alongside our Tech Affiliate Programme to form the wider Data and Tech Community. Find out more at rics.org/tap.

SHENZHEN 2020 DATE FOR THE WBEF SUMMIT Following two days of cutting-edge debate and discussion at our New York summit, the World Built Environment Forum now moves to China for the fifth summit on 11-12 May 2020 in Shenzhen, with the theme of: “Successful city clusters: wealth creation, resilience and great places to live.”

At the heart of China’s Greater Bay Area, Shenzhen is the powerhouse for innovation in the world’s fastest -growing extended urban region, making it the ideal backdrop for our continued discussion on topics most relevant to the future of the built environment. Register your interest at rics.org/uk/wbef/the-summit.

APPLICATIONS OPEN FOR RESE ARCH FUNDING Did you know that you can receive up to £20,000 (or local currency equivalent) of funding from the RICS Research Trust for research in the disciplines of land, real estate and construction? The trust is encouraging research by means of “defined calls” for five specific areas of research, awarding grants in December 2019.

The trust is now accepting submissions for the next round of funding up to a deadline of 17:00 (GMT) Friday 4 October. For further information, and to submit your proposal, visit rics.org/researchtrust.

RICS Corporate Real Estate Summit 18 September, Ritz-Carlton hotel, Bangalore Understanding the needs of occupiers is crucial in corporate real estate today, but keeping pace with changing requirements isn’t easy. This conference will explore how professionals can use technology to improve workplace efficiency and sustainability.

CPD: 6 hours rics.org/cresummit

CHINA

HONG KONG

RICS Greater Bay Area Conference 11 September, Shenzhen How can professionals benefit from the GBA, and how does RICS link talents and resources across the different jurisdictions?

CPD: 8 hours ¥1,395 rics.org/gbahk

RICS Smart and Liveable Cities Conference The Smart City Blueprint aims to transform Hong Kong into one of the world’s leading smart cities. We assess how to realise its ambitions.

Register your interest at: rics.org/smartconfhk

RICS Green and Smart Super-high-rise Complex Summit 18 October, Shanghai Explore how to build and maintain super-highrise projects intelligently.

CPD: 8 hours ¥1,280 rics.org/ highrisesummit

SINGAPORE APREA-RICS PropTech Innovate 7 November, Singapore Celebrating innovation and technology advancements across the real estate sector.

CPD: 6 hours S$369 rics.org/ proptechinnovate

All prices in local currency and exclusive of VAT or local taxes

For details of conferences, training sessions and CPD seminars near you, go to rics.org/events Q3 2019 / MODUS APAC / 49

EXPERIENCE

W H A T I F…

…t her e wer e a minimum s i z e f o r n e w h o m e s?

Focusing on space standards would represent a failure to acknowledge the root cause of the issue, says Indy Johar

50 / MODUS APAC / Q3 2019

Therefore, the question of how much space we need in homes should perhaps not be defined by a minimum standard, but on how we use design to unlock the full potential of the people using the space, and their ability to access public goods.

Rather than just concentrating on unit size, what developers should consider more important is how we create sustainable buildings with healthy, air pollution-free interiors, tied to good access to affordable transportation and green spaces.

There is a danger that architects and surveyors are on the wrong side of history on this. We think we can control space standards, but the real issue is the structure and organisation of our land economy.

Ultimately, if we don’t start thinking about space problems from a new perspective, we could end up accentuating long-standing inequalities in a way that we never intended.

“ We have less of a housesize problem, and more a land problem ”

Indy Johar is an architect and strategic designer at Jericho Chambers in London

INTERVIE W BY BRENDON HOOPER; ILLUSTR ATION BY BR AD CUZEN

The amount of minimum space one requires continues to be a subjective issue.

There have been numerous attempts to introduce a minimum size for some types of home – such as for social housing – while in 2015 the UK government’s guidance suggested the minimum floor area for any new home should be 37 m2 (400 ft2).

But what if implementing such a onesize-fits-all standard is, strategically, the wrong way to look at the question? Because in many ways, we have less of a house-size problem, and more a land problem.

Architects are constantly trying to outdo each other in finding ways of squeezing homes into smaller and smaller spaces.

Creatively, this is all well and good, but the value of this is nominal compared with the actual value of the land the home sits on, or the access to the “public goods” around it.

In our economy, land is the asset that hoovers up the most value, and we have a whole financial system that is geared to advancing the purchase of land. But if you own a piece of land, what do you actually own? If you took an area of land in Hong Kong and the building on top of it, and moved it to Nova Scotia, it would not be worth as much. So where is the value of land coming from? Generally speaking, it comes from its access to public goods.

This means that land values are directly affected by the inflation of value of the surrounding public goods, such as access to labour markets, public infrastructure, transportation and green space. I’d argue it’s not so much the house that goes up in value, but the value of the public goods.

What we’ve been seeing is the privatisation of the public value that cities have been creating, going directly to land owners.