COVID-19 impact: APAC markets present value-buying opportunities with rebound expected in H2 2020

PR83159

HONG KONG, March 4, 2020 /PRNewswire=KYODO JBN/ --

-APAC property markets to recover in H2 assuming COVID-19 outbreak peaks in the

first half of 2020

-Investment opportunities emerge in offices and industrial property across Asia

and Australia; in mainland China we highlight logistics assets and data

centres; hotels offer rebound opportunities in Hong Kong and Singapore

-Shifting office market dynamics in mainland China, Hong Kong, Singapore and

Japan create opportunities for occupiers to negotiate favourable new deals,

adopt new strategies and consider relocation

-Colliers' survey shows landlords in mainland China retaining a positive

outlook; demand expected to pick up in the second half of 2020

Real estate markets across the Asia Pacific region, hit hard by the COVID-19

outbreak, are poised for a rebound in the second half of 2020, according to two

new reports assessing the impact of the virus from leading global commercial

real estate services and investment management firm, Colliers International

(https://www.colliers.com/en-gb/asia )(NASDAQ: CIGI

(https://www.nasdaq.com/market-activity/stocks/cigi ); TSX: CIGI

(https://web.tmxmoney.com/quote.php?qm_symbol=cigi )).

Assuming the spread of COVID-19 peaks in the first half of 2020, the current

slowdown presents property investors a window of opportunity to pick up assets

at attractive prices, occupiers the chance to negotiate favourable leases and

landlords the opportunity to build lasting relationships with clients, the

research shows.

"COVID-19 will hit GDP growth across Asia (but less so Australia) in the first

half of 2020, and investment property sales may weaken as a result.

Nevertheless, if the outbreak peaks in H1, we foresee a rapid recovery in

sentiment in H2, offering investors the chance to buy assets at favourable

prices now," said Andrew Haskins, Colliers' Executive Director of Research in Asia.

"The economic pressures created by COVID-19, combined with aborted events,

travel bans and enforced home working, may result in reduced office leasing

activity in H1 in many markets. From the perspective of property occupiers,

this creates opportunities for the more resilient and nimble organisations to

negotiate favourable tenancy deals, while others can adopt a 'wait & watch'

approach as the situation fully unfolds," said Andrew Haskins.

Following are key findings and recommendations for major APAC markets from the

two reports released by Colliers International – "COVID-19: Impact on APAC Occupier

Property Markets" and "COVID-19: Impact on APAC Real Estate Capital Markets".

Mainland China market down but not out

In mainland China, which has been particularly hard hit by COVID-19, we expect

cash-strapped asset owners may be more flexible on price expectations, giving

long-term investors the chance to hunt for bargains now. We highlight logistics

warehouses, since COVID-19 is further boosting online shopping and thus demand

for logistics space, as well as data centres, for which mainland China's

national work-from-home experiment has boosted already surging demand.

A Colliers survey of over 700 landlords, investors and occupiers in mainland

China indicates that overall, landlords are more positive about expectations

for 2020 in the wake of COVID-19, as only 29% of landlords expect rents to

decline, whereas 45% of tenants are already seeing a decline in business

activity. However, certain tenant sectors such as online shopping, online

education, online gaming, pharmaceuticals and healthcare are little affected,

or may even be achieving sales increases. While a mismatch of expectations

exists, occupiers can use this difficult period to forge deeper relationships

with landlords, while the more secure occupiers can initiate long-term tenancies.

Hong Kong's significant recovery potential

With sentiment in Hong Kong's property market expected to recover as early as

Q2 2020, investors have a chance to benefit from price corrections and acquire

discounted assets. Targets for a rebound in Hong Kong include strata-titled

office space, en-bloc offices in fringe areas, and hotels, whose prices have

fallen about 30% from their peak. Industrial assets for conversion remain stable.

Hong Kong is going through a steep downturn. However, falling rents and the

prospect of a sharp recovery in sentiment in H2 suggest that now is a good time

for growth sectors to expand at lower rental costs. We reaffirm our forecast

that average office rents will fall by 8% in 2020 (13% in Central), with the

decline concentrated in the first half. Although in many Asian cities Colliers

recommends decentralisation, in Hong Kong we are now tactically advising large

tenants to reconsider Central, where vacancy rates have risen and rents are falling.

Stimulus-driven revival in Singapore

Singapore's strong policy response to COVID-19 has instilled confidence in

travellers and investors alike, reinforcing its safe haven status despite the

near-term impact of the outbreak on the hospitality and retail sectors.

A significant rebound in H2 is possible. Investors should target hotels,

prime CBD offices and city fringe business space for long-term growth.

Singapore has seen modest impact from COVID-19, although occupiers have

introduced work-from-home and split operation arrangements. We expect

occupiers to take a long-term view of their accommodation and focus on

accelerated technology adoption, wellness certified buildings as well as

"flex-and-core" strategy or split office locations. In the meantime, cost-conscious

occupiers can find quality office space at good rents in the city fringes.

Liquidity, fixed rents support Japan market

In Japan, COVID-19 has reduced risk appetite and may lead to a temporary fall

in new investment. However, Tokyo offices still offer good value with high yields

compared to zero-yielding bonds, while low stock of modern logistics warehouses

should outweigh high near-term supply, ensuring firm rents. Severe price declines

should be limited to smaller, regional hotels, which were facing oversupply even

before the hit to tourist travel from COVID-19.

Tokyo's landlords continue to benefit from limited supply and low vacancy rates,

while in Osaka, leasing activity ought to slow until supply reappears in 2022.

Considering slowing rental activity, we recommend occupiers renew leases

as soon as possible and explore flex-and-core strategies to reduce dependence

on commuting in line with government guidance.

Australia offers rare medium-term growth prospects

In Australia, the large regional investment market least affected by COVID-19,

rental income growth is still contributing to capital value growth in office

and industrial property, and the overall market presents an increasingly rare

medium-term income growth opportunity. Australia, above all Melbourne, is a

global centre of biomedical research, and we advise investors to look for

opportunities in biomedical precincts.

Australia is still seen as a clean, health-conscious country with a world-leading healthcare

system. COVID-19 has had minimal impact on the occupier market so far. Given the global

uncertainty, some occupiers in affected sectors may pause longer-term occupancy decisions

until they have more confidence. As a result, Colliers has noted a modest increase in flexible

workspace requirements as a temporary solution.

– End –

About Colliers International

Colliers International (NASDAQ, TSX: CIGI) is a leading real estate professional services

and investment management company. With operations in 68 countries, our more than

15,000 enterprising professionals work collaboratively to provide expert advice to maximize

the value of property for real estate occupiers, owners and investors. For more than 25 years,

our experienced leadership, owning approximately 40% of our equity, has delivered compound

annual investment returns of almost 20% for shareholders. In 2019, corporate revenues were

more than $3.0 billion ($3.5 billion including affiliates), with $33 billion of assets under

management in our investment management segment. To learn more about how we

accelerate success, visit our website (https://www.colliers.com/en-gb/asia ) or follow us.

Source: Colliers International