SUNTEC REIT: Charts Clear Course Amidst Challenges

Suntec REIT CEO Chan Kong Leong. (Photo: Company)

Urban spaces hold a particular fascination for real estate specialist Chan Kong Leong.

The Chief Executive Officer of the manager of Suntec Real Estate Investment Trust enjoys exploring commercial buildings to study how space is used to create value.

"I'm fundamentally a real estate guy - I'm always interested to see how the physical asset can be used to generate economic and social benefits, and how different communities develop around a space," he said.

"You get a lot of ideas by looking at what others have done."

Chan, who graduated from the National University of Singapore with a Bachelor of Science in Building with First Class Honours, has 19 years of private and public sector experience in managing investment, development, operations, strategic planning and stakeholder relations. He was appointed CEO of ARA Trust Management (Suntec) Ltd, the manager of Suntec REIT, in January this year, after holding the role of Chief Operating Officer from June to December 2016.

Prior to joining the REIT, Chan held senior management positions in CapitaLand between 2010 and 2016, including Senior Vice President, Head of Regional Investment, Asset & Fund Management of CapitaLand Mall Asia, Program Director of CAPITASTAR, and Regional General Manager, West China, for CapitaLand Group. Between 2003 and 2010, he held senior roles in GuocoLand and Sembawang Kimtrans.

"My experience in China was instrumental in helping me decipher what I see today in terms of market disruptions," Chan said.

China took 10 years to achieve what other markets took a lifetime to develop, largely because it leapfrogged legacy systems, he noted. Over that period, in terms of number of malls, the country went from near zero to an oversupplied market. China also has the highest number of super high-rise office towers being constructed globally.

"Through that process, you see a lot of innovation - for example, how retailers and operators responded to the rapidly changing profile of shoppers. China's consumer base has evolved very quickly over that short span of time."

In comparison, Singapore is grappling with retail headwinds, not because personal consumption levels are declining, but because traditional businesses have not stepped up to meet changing consumer demands.

"Look at how China has embraced the digital revolution - they moved quickly into mobile payment gateways, and now they are way ahead of Singapore in digital payments," he pointed out.

"Such developments give you an idea of what the market will move towards, and a sense of things to come, which in turn offer a perspective on how we can compete."

There is a huge latent potential that can be tapped within the Suntec ecosystem, by using technology to connect all the communities together.

- Chan Kong Leong
CEO

Suntec REIT

Essentially, the future of real estate is not just about physical assets, Chan noted.

"These spaces are where relationships are built, communities are formed, and the landlord has the role as facilitator of these networks, which will eventually translate into business transactions and economic value," he added.

To boost economic value, the REIT intends to drive utilisation of space through asset turns.

"The mall operates from 10am to 10pm. In other words, the asset sleeps when we do. But physical concrete doesn't need rest, so the question is how do we raise utilisation rates during those periods?"

Last year, Chan leveraged digital technology to roll out a 24/7 laundry locker feature, and an intra-city, same-day delivery service for Suntec City office tenants and shoppers.

WashBox24 allows customers to drop their laundry off at their convenience, track its progress, and pick it up any time - 24 hours a day, seven days a week.

"We plan to extend this locker service to other products, not just laundry. By harnessing the power of digital networks, we can upscale our service levels and make the asset work harder in delivering returns," he added.

The mall's same-day delivery service enables shoppers to buy from multiple merchants and have their purchases delivered anywhere in Singapore within the day. "The key is how to use technology to enhance the shopper's experience, and meet the customer's expectations of speed and convenience."

Clearly, Chan is an "optimist" when it comes to technology. "There's no doubt technology can disrupt the market, but it can also open up opportunities," he pointed out.

"The challenge for real estate operators is how to use technology to complete the value proposition, and facilitate the business transactions that are taking place."

There's still a gap in the Singapore market - it lacks sophistication. Gone are the days when all you have to do is open the store and customers will walk in to buy.

- Chan Kong Leong
CEO

Suntec REIT

Meanwhile, to stay ahead in the industry, it's important to weed out distractions, Chan said.

"There's a lot of noise in the market these days, including what's happening on the macro front. Amidst these changing trends, we need to chart a clear path for each respective asset and the REIT as a whole, and understand what it means for us," he added.

"For example, in the area of technology, particularly e-commerce, if you continue to focus on the drawbacks, you will miss out on the opportunities it can create."

This is where thought processes play a part. "What do you usually think of first? If you start by thinking of difficulties and risks, your whole frame of mind will be dictated by problems first, and possibilities second," the 45-year-old noted.

"But if you consider possibilities first, and then do an honest evaluation of the risks, chances are you'll be more willing to work at overcoming obstacles and managing the downside, so as to achieve your desired outcome."

Beware also of negativity, he added. "It's easy to focus on the downside as naysayers are always in vogue. Instead, learn to discern opportunities and leverage on them."

Suntec REIT owns 60.8% in Suntec Singapore Convention & Exhibition Centre, a world leading meetings and conference centre with 42,000 sqm of customisable space. (Photo: Company)

 
Meanwhile, being adaptable and staying relevant amidst shifting trends is always uppermost in Chan's mind, both in and out of the office.

The maxim of learning and re-learning, upheld by American writer, futurist and sociologist Alvin Toffler, resonates deeply. According to Toffler, "the illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn."

"In our rapidly changing environment, if you're doing things the same way as you did five years ago, there's a high probability you're doing it wrong. The goal is to reinvent ourselves, and to learn continuously," he said.

Technology has made possible developments that were never thought possible, and those developments will continue to evolve. "This is the new normal, and even the new norm will continue to change. That is the challenge faced by current and future generations of workers," he added.

"I always encourage my staff and colleagues to think of how they can value-add. In the business world, there're always constraints - that's a fact of life. But if you are continuously adding value, notwithstanding the constraints, that will allow you to earn your keep."

• The Singapore office market remained stable in the first quarter - net take-up improved slightly as landlords continued to offer attractive rents and leasing incentives. Overall CBD rents declined slightly by 1.2% to S$8.44 psf/mth, while overall CBD occupancy improved by 0.8% to 94.1%, according to JLL data. Looking ahead, the Manager will continue its proactive asset management to maintain its high occupancy level, as the Singapore office market is expected to remain under pressure, given the impending office supply and shadow space.
• Market sentiment for the Singapore retail sector remained weak in the first quarter of 2017 as retailers continued to consolidate poorer performing outlets, according to JLL data. Despite the challenging retail market, Suntec City Mall's overall committed occupancy improved to 98.4% as at 31 March 2017. The Manager will continue its active tenant adjustments to fine-tune the trade mix and further strengthen its positioning.
• In Australia, the national office CBD occupancy improved by a marginal 0.1% to 88.1% in the fourth quarter of 2016. Driven by centralisation and expansionary activities, occupier demand remains positive in the Sydney, North Shore and Melbourne office markets. Looking ahead, occupancy and rents are expected to strengthen given strong occupier demand, coupled with limited new supply and stock withdrawal, according to JLL data.