New MIT think tank focuses on sustainable Asian real estate

According to a recent article by the Massachusetts Institute of Technology (MIT), things are moving fast in the Asian real estate market. More specifically, MIT outlines that: “Every 40 days, a city the equivalent size of Boston is built in Asia.”

And while this means exciting development prospects for anyone involved in Asian commercial real estate (CRE), it also means that sustainability, and an innovative approach to growth, are becoming ever more important.

With those issues in mind, MIT’s Center for Real Estate (MIT CRE) recently launched the Asia Real Estate Initiative (AREI), with the goal of “connecting sustainability and technology in real estate.”

Addressing climate issues through innovation

During 2021’s United Nations Climate Change Conference, the real estate sector was identified as a key target for reducing global emissions, and one of the sectors Asian governments are aiming to transform to meet environmental targets.

Zhengzhen Tan, director of AREI, puts it like this: “One of the most pressing calls is to get to net-zero emissions for real estate development and operation.”

As a part of that goal, AREI is focusing on research across three main themes:

  • The future of real estate and live-work-play dynamics;
  • Connecting sustainability and technology in real estate; and
  • Innovations in real estate finance and business

Tan points out that the choices investors and developers make in the region now will “lock in environmental footprints” for the next decade and adds: “We hope to inspire developers and investors to think differently and get out of their comfort zone.”

Sustainability in mind in 2022

The initiative comes in the midst of a strong recovery trend for Asian CRE markets, with PwC’s Emerging Trends in Real Estate® Asia Pacific 2022 report noting that: “Transactions are rebounding after nearly two years of lockdowns and travel embargoes.” The report also adds, however, that the investment landscape in Asia has changed, particularly in terms of how different real estate assets are used.

One of the key trends highlighted in the report is a move towards renovating buildings to change usage or upgrade their environmental performance to a higher standard.

Speaking to the impact AREI is expected to have on this developing landscape, faculty director of MIT CRE and AREI faculty chair, Professor Siqi Zheng, had this to say: “The research on real estate sustainability and technology could transform this industry and help invent global real estate of the future.”

He adds that merging tech and real estate can help developers build out strategies that are “green, smart, and healthy.”

Global climate concerns

In the coming years, it’s likely CRE will see a larger global shift towards these types of sustainability initiatives as developers and investors become more environmentally conscious, and aim to address climate change challenges. For the savvy CRE professional, it’s a space worth keeping a sharp eye on as we move to make green initiatives part of the broader real estate picture.

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Multifamily debt data reaches new record at end 2021

Recent data from the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding report shows that the level of outstanding debt on commercial/multifamily mortgages – during the final three months of 2021 – was $287 billion (7.4 percent) higher than the level seen at the end of 2020.

Report frequency

The MBA releases this data on a quarterly basis and this provides a snapshot of debt and market health at the time. Released at the end of March 2022, this report focuses on the last quarter of 2021 – and compares figures to the preceding quarter and the corresponding quarter of the previous year.

For the purposes of this research, the four major investor groups considered include: “bank and thrift; commercial mortgage-backed securities (CMBS), collateralized debt obligation (CDO) and other asset-backed securities (ABS) issues; federal agency and government-sponsored enterprise (GSE) portfolios and mortgage-backed securities (MBS); and life insurance companies”.

Their data shows that “total mortgage debt outstanding rose by 2.9 percent ($116.0 billion) in fourth-quarter 2021” and specifically that “multifamily mortgage debt grew by $42.1 billion (2.4 percent) to $1.81 trillion during the fourth quarter, and by $121.9 billion (7.2 percent) for the entire year”.

Understanding the data

MBA’s Vice President of Commercial Real Estate Research Jamie Woodwell commented: “Strong borrowing and lending backed by commercial and multifamily properties drove the level of mortgage debt outstanding to a new high at the end of 2021.”

This was evident in every major capital source, he said, adding: “The 7.4 percent annual increase in outstanding debt compares to a 19.5 percent increase in underlying property values.”  

As Yield Pro points out in their analysis, government-sponsored enterprises (GSE) “continued to have the largest share of multifamily mortgages outstanding”.

In related material, MBA confirmed that commercial and multifamily mortgage delinquencies in the US also declined in Q4 2021, characterizing the rates as “down or flat for every major investor group”.

Prop trends: Sustainability is the new black

The Covid-19 pandemic might have been an unforeseen crisis that sent the world spinning but, general volatility and the incidence of global or major crises are expected to rise in the coming decades. This is the result of a complex matrix of overlapping issues, including climate change, globalization, population growth and urbanization, and migration.

Against this backdrop, analysts have been warning that companies need to relook at their plans and forecasts through an ESG criteria lens. ESG stands for environmental, social, and governance.

According to a McKinsey report on the topic (published in Nov 2019), “ESG-oriented investing has experienced a meteoric rise. Global sustainable investment now tops $30 trillion—up 68 percent since 2014…” They ascribe this sharp acceleration to “heightened social, governmental, and consumer attention on the broader impact of corporations, as well as by the investors and executives who realize that a strong ESG proposition can safeguard a company’s long-term success.”

ESG in CRE

ESG is a rising concern for all businesses, and commercial real estate (CRE) is not exempt. ESG within this context would include matters such as the energy footprint of a property or development, its carbon emissions, ethical and local supply chains, labor relations, diversity, and inclusivity, and then the governance procedures and controls in place to comply with the law and meet the needs and expectations of all stakeholders.

A solid ESG strategy creates opportunities for partnerships, strengthens ties with communities, and links back directly to things like corporate missions and visions, for the way you want to operate and the changes you want to make in the world. On the other hand, failing to account for ESG in your property or development plans can become a material risk for your business.

Competitive advantage

ESG platform Goby looks at these issues specifically within CRE, and they believe having an ESG strategy is a competitive advantage for CRE professionals and brokerages. There are, they say, many tangible benefits to this – such as lowering your energy costs – but moreover, emphasize the intangible benefits that flow from a solid ESG strategy.

Goby’s ESG in CRE report (hosted on HubSpot) argues: “Intangible benefits are harder to measure directly, and include metrics like tenant comfort, word-of-mouth advertising from tenants about building improvements, and a reduced environmental impact.

Attracting investment through ESG

Over and above “doing the right thing”, ESG advocates believe that these holistic sustainability matters can make a compelling investment case within CRE investing.

As the Goby report outlines, when asked what they considered essential and important elements of ESG investments some 79% of investors cited ethical parameters and values, 78% mentioned positive environmental and social impacts, and 77% reported that they believed ESG factors could play a critical role in broader financial performance.

This echoes the McKinsey investment growth story, and with those numbers, it’s not a leap to say that that’s the final word on the bottom line.

Self-Guided Apartment Tours: Helping or Hurting?

The pandemic revolutionized contemporary commercial real estate leasing processes.

But, we all already know that. This past year has been flooded with conversations regarding commercial real estate’s online migration after COVID put an end to in-person transaction models. The new era of commercial real estate is a product of social distancing efforts combined with efficiency-boosting strategies.

The Popularization of Self-Guided Tours

With this in mind, it shouldn’t be surprising that the trend of self-guided touring has taken off this year.

If you’re new to the idea of a CRE-sector self-guided tour, think a self-guided museum tour with headphones. Now copy that system over into a multifamily complex, where a renter would take an independent tech-powered tour of an apartment. This system can also be used to show listings for office spaces, retail, and other sectors.

Today’s self-guided tours are mainly app-driven and feature maps, security settings, and audio content.

The Value of Self-Guided Tours

Self-guided tours offer a pivotal alternative to other remote touring options – most of which take place behind a screen. Walkthrough video tours, 3D virtual tours, and listing photos cannot achieve the in-person experience that tenants crave. Self-tours have the upper hand over traditional team member guided tours since they’re socially-distant options.


Even outside of COVID’s circumstances, self-guided tours provide tangible benefits to an asset’s productivity. Prospective tenants don’t need to depend on a member of the leasing team or property manager to explore a listing.

Instead, they’re able to operate on their own schedule which expands the opportunity for showings. Plus, it frees up team members to take care of other matters.

For both team members and tenants, it seems like self-touring is a total win.

Analyzing Self Touring within CRE

However, nothing is ever that clear. A deeper look and some experience with the self-guided tour system is prompting some CRE professionals to think differently.

Recently, the question has been raised as to whether self-guided tour systems are helping or hurting commercial real estate. Across every CRE sector, self-guided tour models are revealing some prominent drawbacks in the system.

One of the main issues with the self-guided tour system is that it standardizes the marketing process. When prospective tenants are going on a technically-driven tour, they’re not able to ask questions as they arise in real-time.

Property managers and sales teams also lose the opportunity to personalize the tour experience to the prospect’s unique needs. Since the benefits of a listing can’t be explained in person, the tour may lose its potency.

Even though the self-guided tour system is intended to feature all of the details about a listing, the real-life experience that CRE is reporting notes that this isn’t the case. It’s not easy to anticipate the specialty questions a potential tenant may have, and it’s idealistic to assume that tenants will get in touch post-tour with property teams to make inquiries. As a result, self-guided tours may result in missed opportunities for leasing.

What’s your opinion on self-guided touring within commercial real estate?