Research & Forecast Report

COVID-19

INSIGHTS & RECOMMENDATIONS

for APAC Real Estate

for APAC Real Estate

Read​ onforan​ overviewof​ our insights

Asia prime office market rent

Relative to prior period

2020

2021

Beijing

Seoul

Tokyo

Shanghai

Singapore

Hong Kong

Manila

Read on for an overview of the report

LOCATIONS
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COVID-19

INSIGHTS & RECOMMENDATIONS

for APAC Real Estate

Key Takeaways - Q1 2019

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The overall vacancy rate rose 90 basis points to 6.0 percent.

Overall weighted rents rose 2.1 percent to $87.15 per square foot.

The city experienced nearly 2.6 million square feet of closed transactions.

Eight investment sales closed this quarter for a total of nearly $1.2 billion in investment volume.

San Francisco posted approximately 105,000 square feet of negative absorption.

There was over 4.2 million square feet of office space under construction throughout San Francisco.

Investment markets: Big city grit

The property market’s resilience in Asia’s major cities is evident in total investment volumes, which registered only a 3% dip in the 10 largest urban property markets compared to a 13% fall in the overall regional market in the first nine months of 2019. This is a healthy outcome in light of the challenges of the past year. While growth continues to decelerate modestly, low to negative interest rates should help raise total investment volumes by 7% to USD124 billion in 2020.

Office Leasing

INSIGHTS & RECOMMENDATIONS

COVID-19 continues to affect markets across borders, multiple real estate sectors and people in our communities across Asia Pacific. We’re here to help you be enterprising, to navigate the impacts of the novel coronavirus and make the most of opportunities in this challenging time.

 

Colliers is providing you insights and recommendations from across APAC in a single resource, to help you continue to accelerate your success through property.

 

Read on for recommendations from our market leaders and workplace experts.

 

CAPITAL MARKETS

COVID-19 will cut 2020 growth across Asia, but less so Australia. Asian retail has been hard hit. If the outbreak peaks in H1, with a rebound in H2, investors can pick up assets at good prices now.

 

  • China: 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 demand is surging.
  • Hong Kong: Targets for a rebound include strata-titled office space, en-bloc offices in fringe areas, and hotels.
  • Singapore: The impact of COVID-19 is relatively modest. Office and hotel assets are attractive on long-term growth.
  • Japan: Tokyo offices offer good value, quality logistics assets are attractive. Regional hotels face oversupply.
  • Australia has the lowest impact from COVID-19. Income growth helps drive capital growth for office and industrial property.

OCCUPIER MARKETS

We expect the outbreak of COVID-19 to continue to affect APAC markets in H1 2020, with a recovery in H2 2020. What does this scenario imply for office occupiers in Asia Pacific? We recommend:

 

  • China: Occupiers in sectors little affected by the virus should agree longer-term leases.
  • Hong Kong: Enterprising occupiers can negotiate better deals with responsive landlords in H1 2020.
  • Singapore: Occupiers should rationalise space needs and adopt new technology.
  • Japan: The Tokyo market still favours landlords. Tenants should lock in options soon.
  • Australia: Impact levels rising. We are seeing delays in decision making. Strong demand for contingency work from home plans.

CHINA

The outbreak of COVID-19 has strained most manufacturing and service industries in China. Whilst the broader economic effect on China is still hard to gauge, there are steps which can be taken to support your real estate performance and action opportunities.

 

Based on Colliers’ survey of over 700 landlords, tenants and investors in February 2020, we recommend:

 

  • Landlords should proactively contact clients and listen to their needs.
  • Retailers and mall operators should expand their online footprint, with data centres likely benefiting.
  • Depressed near-term valuations provide a chance to hunt for investment bargains. 

RECORD LAND SALE IS A VOTE OF CONFIDENCE IN CHINA’S REAL ESTATE MARKET

After shutting down most manufacturing and service sectors for three weeks, China has officially resumed work on Monday (February 24). As the factories rumble back to action, China is also faced with the challenge of striking a balance between virus containment and getting its economy back on track. In the midst of one of China’s most acute economic setbacks and concerns on the lingering effects from the coronavirus, Hongkong Land surprised the market on February 20 with a record land bid of RMB31.05 billion (USD4.48 billion) for a development site in Shanghai’s Xuhui West Bund area.


The site, which was listed for sale in December of last year, is 231,300 square meters and is located in the south of Shanghai’s traditional downtown area between Huangpu river’s west bank and Longhua Middle Road. Reportedly, the site would be fully developed in a few phases by 2027 with a total gross floor area (GFA) of 1.09 million square meters (11.73 million square feet), of which 650,000 square meters would be allocated for office space, 210,000 square meters is planned for retail, and the remaining would be used for a hotel, high-end residentials, affordable housings and long-term lease apartments. Hongkong Land’s record breaking land acquisition is a vote of confidence to the real estate market, as it is a clear indication that foreign investors are still planning to invest in China for the long-term. In open statements, Hongkong Land said: “the land acquisition provides the Group with an attractive opportunity to develop and operate a commercial complex of scale in a prime location in Shanghai, the predominant commercial hub of the Chinese mainland.”


While Hongkong Land’s record high price tag may raise eyebrows, our Research survey in the past has shown that even with near-term political or economic uncertainties, both domestic and foreign investors have held a positive long-term outlook towards China’s economic growth. Based on Colliers Pan-China investment survey published in July 2019, 68% of the respondents expressed their willingness to continue investments into China, as investors are adopting a long-term view to avoid missing out the huge potential demand. Also, in Colliers most recent survey on the coronavirus impact on China’s real estate market, most investors believe real estate valuations will probably be depressed in the near term but should rebound in H2 2020, and the current market weakness should provide an opportunity to hunt for bargains.

HONG KONG

Market players in Hong Kong generally expect the history of SARS in 2003 to be repeated, as COVID-19 poses downside risks to China, as well as Hong Kong SAR which faced a tough year in 2019. We see opportunities for investors to enter the market, landlords to focus on growth sectors and occupiers to expand at lower rental costs.

 

  • If capital values initially decline due to COVID-19, this may well create a chance for investors to enter the market.
  • Landlords should focus on long term occupier sectors likely to remain active despite the virus, while offering retailers short-term rental relief
  • Occupiers desiring Central offices should look now given recent increases in the vacancy rate and falling rents

Singapore

On top of efficient containment measures since the Disease Outbreak Response System Condition (DORSCON) alert level was raised to Orange on 7 February, the Singapore government has announced a SGD4 billion support package in the recent Budget 2020 for sectors most affected by the COVID-19 outbreak during this challenging period.

 

While we continue monitoring the evolving situation closely, we make the following recommendations:

 

  • Office:​ Occupiers rationalise their real space requirements and accelerate technology adoption. Colliers recommends that they consider a flex-and-core™ strategy or split office locations, and wellness certified buildings
  • Retailers: Take this opportunity to expand offline-to-online strategies, and for landlords to line up marketing campaigns to recapture shoppers as demand returns
  • Industrialists and landlords: Use this period to upgrade assets to align with Industry 4.0. The crisis clearly highlighted the importance of efficient inventory and last-mile management process for warehouses
  • Investment: Sales may be weak in H1 2020, but could see a rapid recovery in H2 assuming trends follow those of SARS in 2003. Investors should focus on long term drivers, which remain most attractive for hotels and office assets.

JAPAN

The outbreak of the Novel Coronavirus (COVID-19) has resulted in increased adverse impacts on the Japanese economy. As China is Japan’s largest trading partner, representing 29% of imports and 22% of exports, we expect both demand and supply impacts in coming months. Based on Colliers’ research, we recommend,

 

Investors:

 

  • Target logistics on the back of limited stock of modern logistics assets. Tokyo offices remain attractive with Asia’s widest yield spread over bonds.

Occupiers:

 

  • Renew leases and lock in available positions with their landlords as soon as possible, since more relocation plans as well as viewings are postponed.
  • Promote a flex-and-core strategy as a way to mitigate spread risk and ensure business continuity.
  • Implement a flexible work arrangement in city campus format to accommodate the government’s guidance to minimise the time required for commuting.

KOREA

Korea’s robust and consistent standard operating procedures (SOPs) in identifying and containing the spread of the virus has led to a slowing of the spread of COVID-19, a benefit of ​ the country’s significant investment in infectious disease control following MERS and SARS. With many impacts on retail, office and hospitality in a fast-evolving environment, we identify areas of change and opportunity for occupiers and investors:

  • Office:​ COVID-19 may result in a near-term impact to leasing demand in the Seoul office market at a time when new supply is due to rise. This creates an opportunity for tenants to seek space for relocation or expansion on favourable terms.
  • Remote working: Corporates should implement telecommuting and work from home policies with clouded and Internet of Workplace (IoW) infrastructure, and Flex and Core strategies, for short-term continuity and longer-term workforce benefit.
  • Investment: We expect the office investment market to remain stable in 2020 due to abundant liquidity and low interest rates. Offices that offer stable returns compared to equities remain popular with investors, and opportunities abound for well-capitalized buyers, emphasizing deal-closing ability.
  • Logistics: Industrialists should focus on integrated logistics and distribution facilities, we expect increases investment in cold chain facilities.
  • Hotels: We expect the hotel industry will be sluggish due to the impact of COVID-19.

INDIA

The outbreak in India accelerated rapidly in March leading the government to announce a national lockdown until 15 April 2020. The government also announced a stimulus plan for the most impacted strata of people, reduced interest rates among other relief measures. While all real estate segments have been affected, we identify certain opportunities, and make the following recommendations:

 

Occupiers

 

  • Seek favourable rents and lease terms from landlords
  • Accelerate technology adoption, build data capabilities to enable remote working
  • Consider a Flex-and-Core™ strategy or split office locations
  • Consider cost-effective solutions for expansion in fringe locations including flexible workspaces

Developers: ​ Landlords and developers should place importance on wellness, and sustainability in buildings.

 

Investment: ​ Recommend investors scout for assets in data centres, warehousing and logistics, given strong potential in terms of cloud infrastructure, and robust domestic demand. Investors to also look for opportunities in cold storage facilities.

 

Logistics: ​ Recommend developers to invest in modernizing their warehousing facilities and improve wellness and safety norms.

 

Philippines

The Philippine economy grew by 5.9% in 2019, the slowest pace since the 3.7% recorded in 2011.The economic growth potential for 2020 will be clipped by the impact of COVID-19. In our opinion, a coordinated policy and monetary response from the Philippine government and central bank is likely to instill confidence in the property market before the end of 2020, assuming the outbreak peaks in H1 2020.

 

  • Landlords should target traditional and outsourcing tenants considering our expected decline in demand from POGOs; communicate early with tenants regarding flexible lease terms; and emphasise wellness features and certifications.
  • Occupiers should take this opportunity to negotiate long-term deals with landlords and look for new buildings in business hubs’ fringes offering lower lease rates.
  • Condominium developers should highlight property management as it is crucial to safety and health of buildings and unit owners; and offer more flexible terms to attract buyers. Developers that responded well to the crisis will stand out once the pandemic wanes.
  • Mall and hotel operators should line up marketing campaigns to recapture demand as the COVID-19 health issue wanes.

 

WORKPLACE ADVICE FOR BUSINESS CONTINUITY & PRODUCTIVITY

Cloud Your Workforce

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As telecommuting and remote working become the norm for affected workforces, we look again at how best to “cloud your workforce”, enhance productivity of your people and maximise your real estate.

 

ReadFlex, Core & The Cloud

 

Contact our Expert: Abhishek Bajpai

Managing Director, Corporate Solutions APAC

Enabling Wellness through Tech

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Health and connectivity can both benefit from wellness tech. We recommend to identify key technologies that can support the health and wellness across workspaces, remote workers, and the organisation.

 

ReadHow? Where? WELL!

 

Contact our Expert: Victoria Gilbert

Associate Director, Wellness Consulting, Asia

Flexible Workspace Outsourcing

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In this challenging time as COVID-19 impacts workplace operations globally, we advise how occupiers can engage with flexible workspace operators, as both a near-term business continuity solution and longer-term way of working for enterprises.

 

ReadRecommendations for Flexible Workspace

 

Contact our Expert: Jonathan Wright

Director, Flexible Workspace, Asia

 

Research & Forecast Report

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For​ informationand​ inquiries,​ please​ contact​ us

CHINA

Tammy Tang

Managing Director | China

 

HONG KONG

Nigel Smith

Managing Director | Hong Kong

 

SINGAPORE

Tang Wei Leng

Managing Director | Singapore

 

 

 

PHILIPPINES

Richard Raymundo

Managing Director | Philippines

 

JAPAN

Katsuji Tokita

Managing Director | Japan

 

KOREA

Robert Wilkinson

Managing Director | Korea

 

INDIA

Sankey Prasad

Managing Director | India

 

 

 

ASIA RESEARCH

Andrew Haskins

Executive Director | Asia

 

CHINA RESEARCH

Dave Chiou

Senior Director | China

 

HONG KONG RESEARCH

Rosanna Tang

Head of Research | Hong Kong and Southern China

 

SINGAPORE RESEARCH

Tricia Song

Head of Research | Singapore

 

JAPAN RESEARCH

Mari Kumagai

Senior Director | Japan

 

KOREA RESEARCH

Judy Jang

Associate Director | Korea

 

INDIA RESEARCH

Megha Maan

Senior Associate Director | India

 

SINGAPORE RESEARCH

Tricia Song

Head of Research | Singapore

 

PHILIPPINES RESEARCH

Joey Bondoc

Senior Manager | Philippines

 

OCCUPIER SERVICES

Sam Harvey-Jones

Managing Director | Asia

 

CAPITAL MARKETS

Terence Tang

Managing Director | Asia

 

VALUATIONS & ADVISORY

C K Lau

Managing Director | Asia

 

Andrew Haskins

Executive Director | Research

Andrew.Haskins@colliers.com

+852 2822 0511

Sam Harvey-Jones

Managing Director | Occupier Services

Sam.Harvey-Jones@colliers.com

+852 2822 0509

Terence Tang

Managing Director | Capital Markets

Terence.Tang@colliers.com

+65 6531 8565

CK Lau

Managing Director | Valuation & Advisory Services

ck.lau@colliers.com

+852 2822 0665

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