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CBRE RESEARCH | ASI A PACIFIC SPECI AL REPORT
WHY THE CORONAVIRUS
(COVID-19) OUTBREAK
COULD HAVE A LASTING
IMPACT ON ASIA PACIFIC
REAL ESTATE
2
CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
The coronavirus (COVID-19) outbreak has cast a shadow over the Asia Pacific economy in the opening months of 2020 and poses a downside risk to global growth.
The short-term impacts are significant and continue to
evolve along with the development of the disease. The
suspension of manufacturing in China is causing
considerable disruption to supply chains. Public health
concerns and travel restrictions nationally and
internationally have seriously impacted consumption
activity and prompted consumers to avoid crowds and
stick to daily necessities. Regional and global tourism
and air travel have been hit hard.
In the real estate sector, some office occupiers,
especially those in Greater China, have postponed
major leasing decisions, brick-and-mortar retailers
across Asia Pacific are feeling the strain, and general
logistics operators are struggling to deliver goods to
customers due to shortage of labor. Many investors have
moved into wait-and-see mode.
While the large number of unknowns about COVID-19
make it difficult to predict when it will be contained, the
consensus appears to be that the outbreak is likely to be
under control by the end of H1 2020. However, as the
impact continues to grow in terms of scope and
magnitude, attention is now turning to the long-term
consequences for the real estate sector.
This Special Report by CBRE explains how the outbreak
has impacted the Asia Pacific real estate sector thus far
and identifies several potentially long-term trends that
could become a permanent feature of the regional
property landscape.
In the office sector, these include the accelerated
adoption of flexible working, the re-evaluation of
Business Continuity Planning (BCP) and workplace
wellness measures. The increasing use of omnichannel
strategy and pick-up points are likely to affect the retail
sector, while the logistics sector is set to expedite the
integration of automation in logistics operations. On the
investment front, a lower interest rate environment will
ensure prime core assets remain ideal defensive plays,
while the evolution of consumer behaviour and adoption
of new technology such as the cloud will drive sustained
demand for alternative sectors such as data centres and
cold storage.
THE SHORT-TERM IMPACT
INTRODUCTION
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
THE SHORT-TERM
IMPACT
CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Economy – growth set to dip in H1 2020
China accounted for 16.8% of global GDP in 2019,
compared to just 6.9% in 2003, when the SARS outbreak
occurred1. The significant slowdown in economic activity
on the mainland, where GDP growth forecasts for H1
2020 have been downgraded to 4 – 5% y-o-y2
following
the outbreak, is already spreading to other regional
markets, many of which are bracing for a moderate
short-term impact. CBRE has revised down its 2020 Asia
Pacific GDP growth forecast from 4.2% to just under 4%3
in 2020.
Consumption has been hit hard, with discretionary
spending in Greater China falling sharply as people
stay home and avoid crowded locations, particularly
shopping malls. While the entertainment, F&B and
fashion categories have been most affected by the
slowdown in household retail spending, retailers with
established omnichannel platforms have helped to offset
some of the impact.
With Chinese visitors accounting for at least 33% of
tourist shopping expenditure in top Asia Pacific
destinations such as Singapore, Korea, Japan and
Australia, the imposition of travel restrictions and reduced
flight capacity will cause a significant decline in inbound
demand across the region. In Hong Kong SAR, the
impact on retail sales could be even higher given that
over 75% of the city’s tourist arrivals originate from
Mainland China.
Falling visitor arrivals will also severely impact the
hospitality sector. In Singapore and Hong Kong SAR,
hotel revenue per available room (RevPAR) and
occupancy are already under downward pressure.
Elsewhere, several upscale hotels in Ho Chi Minh City
reported an occupancy rate as low as 30% in February
2020, despite the first two months of the year traditionally
being a busy period.
-4%
-2%
0%
2%
4%
6%
8%
Mainland
China
India Australia Korea New Zealand Singapore Japan Hong Kong
SAR
Asia Pacifc
As of Jan 2020 As of Feb 2020
Figure 1: Asia Pacific 2020 GDP Growth Forecast
Source: Oxford Economics, CBRE Research, February 2020.
1 Oxford Economics, CBRE Research, February 2020.
2 Oxford Economics, February 2020.
3CBRE Research, February 2020.
THE SHORT-TERM IMPACT
ECONOMY
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
The other major disruption has been to global supply
chains linked with China. Industrial manufacturing in
China will take some time to return to normal due to the
slower return of workers resulting from mandatory
quarantine measures in major cities; the need to source
personal protection equipment (PPE); and disruption to
the supply of raw materials resulting from the suspension
of inter and intra-city transport.
Data from Oxford Economics show that the global
electronics and electrical equipment sectors are
particularly reliant on China, with over 10% of total non-
Chinese sectoral output originating from the mainland4.
This is having a severe knock-on effect on global
markets, with automotive, electronics and
pharmaceuticals companies all issuing warnings about a
potential halt in production. In Korea, the domestic
automotive industry has had to halt production for more
than a week, while the country’s exports and domestic
earnings are suffering as intermediate goods cannot be
imported from China. Elsewhere, heavy construction
equipment maker JCB has reportedly cut production and
working hours at its UK factories after more than 25% of
its component suppliers in China were closed because of
the outbreak5.
4 How global supply chains will feel coronavirus’ chill, Oxford Economics, February 2020.
5 Financial Times [link], February 13, 2020.
THE SHORT-TERM IMPACT
ECONOMY (CONTINUED)
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Office – delays to new commitments offset by
postponement of new project completions
Asia Pacific office occupiers were in a cautious mood at
the beginning of the year due to growing concern over
the late-cycle economy. This view has hardened since the
outbreak, with the negative impact on leasing demand
mostly felt in Greater China, where some occupiers have
postponed major leasing decisions amid widespread
disruption to business operations. However, leasing
activity is likely to pick up as early as Q2 2020, should
the outbreak be contained.
Occupiers already engaged in office fit-out projects face
delays to construction and are requesting extensions to
fit-out periods. Some may have to delay plans for new
office moves, with budgeted CapEx originally earmarked
for Greater China now allocated elsewhere. Occupiers
engaging in renewals are aiming to achieve flexibility in
space requirements for future headcount adjustments
rather than rushing to secure space now.
CBRE believes that the impact on other Asia Pacific office
markets will be minimal, as demand is domestic driven
(rather than by Chinese firms) or supported by low
vacancy and a lack of new supply. The office sector is
therefore likely to be the first to recover after the
outbreak. Regional net absorption will hold firm in full-
year 2020, although expectations have been slightly
revised down to flat growth from an upper 5% boundary
in our earlier forecast.
Figure 2: Net Absorption in Major Markets Impacted by SARS in 2003
Source: CBRE Research, February 2020.
(500)
0
500
1,000
1,500
2,000
Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004
Net A
bsorption (‘000 sq. ft. N
FA
)
Beijing Shanghai Guangzhou Shenzhen Taipei Hong Kong SAR Singapore
SARS Peak
Revisions to rental growth forecasts are mainly confined
to some Chinese markets and Hong Kong. Rental
revisions in China are not expected to be significant as
some landlords, especially State-owned Enterprises
(SoEs), prefer to grant longer rent-free periods and rental
holidays to existing tenants rather than acquiesce to lower
base rents. Non-SoE landlords are observed to be
holding rents steady for existing tenants. In addition,
around 10% of forecasted new supply in 2020 will be
postponed due to construction delays, alleviating some
oversupply pressure on these markets. Rents in Hong
Kong will come under greater downward pressure but the
full-year decline is likely to be frontloaded in H1 2020
and will also partly be attributable to ongoing market
weakness witnessed since last year.
THE SHORT-TERM IMPACT
OFFICE
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Retail – consumption slows but omni-channel
retailers display resilience
COVID-19 has had the strongest impact on the retail
sector. Thousands of retail stores and malls in China
have temporarily closed, with a survey by the China
Chain Store & Franchise Association (CCFA) finding that
around 40% of its members were open for business in
early February6. Although 70% of malls in tier I cities
have now re-opened, the resumption of business in tier II
cities will be slower. The widespread closures are set to
curtail full-year retail sales growth from 8% in 2019 to
about 6%7, with the first two months of the year usually
accounting for around 16% of annual retail sales8
due to
the Chinese New Year holidays.
Numerous markets in Asia Pacific9
have imposed travel
restrictions on visitors from mainland China, with some
also prohibiting arrivals from Taiwan, Hong Kong SAR,
Macau SAR and Korea. The fall in mainland Chinese
visitors has impacted retailers and shopping centres in
key regional markets catering to these visitors.
Rents are coming under strong downward pressure.
Major retail landlords in Mainland China and Hong
Kong SAR such as Wanda, China Resources, Seazen,
Swire Properties and SHKP have announced temporary
rental cuts to alleviate pressure on tenants. Elsewhere, a
landlord in Seoul has reportedly agreed to provide a
short term rental reduction and relief scheme for its
tenants, with other landlords in Korea may follow suit. In
Singapore, Mapletree Commercial Trust has offered
rental rebates for selected tenants at VivoCity, while Jewel
Changi Airport has provided rental rebates to its F&B
occupiers. CBRE Research expects this trend to continue
until the situation improves. Apart from rental rebates,
landlords may also consider mutually beneficial schemes
such as purchasing goods or cash coupons from tenants
for later promotional use.
Figure 3: Mainland Chinese Visitors as a % of Total Tourist Arrivals and Spending
Source: CEIC, Hong Kong - Tourism Board, Japan – Tourism Agency, Taiwan - Tourism Bureau, Ministry of Transportation and Communications, Korea - Korea Tourism Organization,
Australia - Australian Bureau of Statistics, Tourism Research Australia, Singapore - Singapore Tourism Board, Thailand - Ministry of Tourism and Sport, Vietnam - Vietnam National
Administration of Tourism, Malaysia - Tourism Malaysia, CBRE Research, February 2020.
6 China Chain Store & Franchise Association, February 2020.
7Oxford Economics, February 2020.
8National Bureau of Statistics of China, CBRE Research, February 2020.
9 Markets which have implemented travel restrictions on people who have visited mainland China include Hong Kong SAR, Macau SAR, Japan, Korea,
Singapore, Australia, New Zealand, India, Indonesia and Vietnam, as of February 27 2020.
Taiwan and the Philippines have restricted visitors from mainland China, Hong Kong SAR and Macau SAR, as of February 27 2020.
Mainland China, Hong Kong SAR, Taiwan, Singapore, Japan, India, Vietnam and Thailand have restricted visitors from Korea as of February 27 2020.
THE SHORT-TERM IMPACT
RETAIL
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
0%
20%
40%
60%
80%
100%
Hong Kong SAR Korea Vietnam Japan Thailand Taiwan Singapore Australia Malaysia
Contribution by Mainland Chinese tourists
(2018/ 2019)
% of Total Tourist Arrivals
% of Total Tourist Shopping/Spending
8
CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Rents in Greater China and Singapore – which are
already suffering from weaker fundamentals – are
coming under pressure. Prime streets catering to the
tourist trade will be hit the hardest, with CBRE revising
down its 2020 rental growth forecast for these markets by
20 to 500 bps. Around 20% of new supply due for
completion in China this year will be postponed, with
additional delays expected should developers continue to
find it challenging to secure tenants over the remainder
of the year.
While many traditional brick-and-mortar retailers are
struggling to ride out this period and are seeking
temporary rental reductions, those with omni-channel
platforms, especially in the grocery and fresh food related
categories, have reported a surge in sales. JD.com
registered a 400-500% y-o-y increase in fresh food sales
during Chinese New Year10
. The growth of online
shopping and on-demand food delivery therefore
appears to be cushioning the overall negative impact on
private consumption.
10 Food Navigator-Asia.com [link], February 12 2020
THE SHORT-TERM IMPACT
RETAIL (CONTINUED)
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Industrial & logistics – industrial production
temporarily operating well below capacity
Industrial manufacturing activity in China has been
disrupted due to the extension of the Chinese New Year
break, interruption of inter-city transport systems and the
slower return of workers resulting from mandatory
quarantine measures in major cities. Factories are
required to meet new public health protection standards
before resuming work, while the production of medical
supplies and necessities has been prioritised. Industrial
production is therefore not expected to return to full
capacity until mid-March at the earliest.
The disruption will have a knock-on effect on
neighbouring countries, with 40% of intermediate
goods in Asian supply chains originating from China11
.
For example, Hyundai has suspended production lines
in Korea due to the lack of parts from China12
. Capital
Economics has stated that Vietnam, Malaysia and
Cambodia are the most vulnerable markets as over 6%
of the gross value-added of their economies come
from China.
Business to Consumer (B2C) logistics in markets
impacted by the outbreak has also been affected, albeit
to a lesser extent. A surge in online shopping in most
Asia Pacific markets, especially for groceries and food,
has led to a surge in demand for last- mile logistics.
However, many providers across the region have
struggled to cope with this spike in demand, a situation
exacerbated by a shortage of labour. Deliveries have
therefore been affected. A gradual increase in demand
has also been observed in comparatively under-served e-
commerce markets such as Hong Kong SAR, where
providers have struggled to cope with the surge in online
orders and on-demand food delivery.
The outbreak is set to accelerate the upgrading of the
supply chain to support omnichannel retail, which will
support further growth in logistics space demand.
CBRE retains its forecast of mild rental growth this year,
despite slower overall leasing activity resulting from
the disruption.
Figure 4: Disruption to Global Supply Chains
Source: Capital Economics, February 2020.
Imported manufacturing inputs from China as % of total imported manufacturing inputs
11 Bloomberg [link], February 5, 2020.
12 Bangkok Post [link], February 7, 2020.
0%
10%
20%
30%
40%
50%
Cam
bodia
Vie
tnam
Hong K
ong SA
R
Korea
Mala
ysia
Thailand
Indonesia
Philip
pin
es
Australia
Taiw
an
Japan
New
Zeala
nd
India
Sin
gapore
THE SHORT-TERM IMPACT
INDUSTRIAL & LOGISTICS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
H1
2
002
H2
2
002
H1
2
003
H2
2
003
H1
2
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H2 2004
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H2
2
004
China Hong Kong SAR Singapore Japan Australia Korea
USD
m
illion
Commercial Real Estate Transaction Volume (2002-2004)
Investment – investor demand weakens
temporarily
There will be a short-term slowdown in purchasing activity
across the region, with many investors postponing
investment decisions and moving into wait-and-see
mode. Mainland China and Hong Kong SAR will
experience a sharp decline in deal flow in Q1 2020 due
to reduced business activity. Australia and Singapore will
also be relatively quiet as landlords opt to postpone sales
due to potential cross-border investors being unable to
perform site visits. The impact on Japan and Korea will
be relatively mild thanks to continued solid investment
demand from domestic investors.
Despite the current circumstances, there is still ample
capital in the region seeking medium to long-term real
estate investment opportunities. Asia Pacific-focused
private equity real estate funds raised USD 38 billion in
2018-2019, an amount well in excess of the USD 5
billion raised in 2002-2003, indicating a significantly
larger investment pool. Relief measures such as
supportive monetary policy and anticipated interest rate
cuts across the region are lending support to pricing.
Purchasing is likely to improve once the outbreak has
been contained, supported by pent-up investment
demand. CBRE’s 2020 Investor Intentions Survey found
that investors retain a solid appetite for real estate, with
cross-border investors expected to shift their focus to
Australia and Japan given the low cost of financing,
while turning more cautious towards Greater China in
the short term.
Assets providing steady income streams will be the focus,
while interest in logistics assets will strengthen alongside
solid e-commerce industry growth. Demand for retail and
hotel assets will suffer due to falling rental income and a
slowdown in regional tourism arrivals, respectively. This
will exert downward pressure on capital values.
Opportunistic investment in China debt will continue
apace, with highly leveraged Chinese developers set to
come under even greater pressure due to the halt in
business activity and slowdown in residential sales.
Figure 5: Investment Activity in China and Hong Kong SAR Improved After the SARS Outbreak
was Contained
Source: RCA, National Bureau of statistics of China, Hong Kong Land Registry, CBRE Research, February 2020.
SARS OUTBREAK
THE SHORT-TERM IMPACT
INVESTMENT
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
THE LONG-TERM
IMPACT
CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Greater Adoption of Flexible Working
CBRE believes the outbreak will create further
opportunities for office occupiers to test the feasibility of
flexible working or agile working in many markets. In
recent weeks, the government and private sector in
Singapore, Hong Kong SAR, Macau SAR, Mainland
China, Japan and Korea have ordered or encouraged
employees to work from home in order to limit social
contact to slow the spread of COVID-19.
Some companies – particularly those whose staff require
only a computer and internet connection to perform their
duties – have found this experiment to be relatively
successful. While concerns remain over productivity and
collaboration among employees working from home,
CBRE believes this large scale trial may encourage
companies to be more willing to accelerate the adoption
of flexible and home working polices in future.
Adjustment of Space Utilisation Metrics
Space utilisation in agile workplaces will be re-evaluated
due to the need to maintain comfortable density (as
opposed to high density) to limit the transmission of
diseases. At the same time, the workforce will become
more mobile along with the greater adoption of flexible
working after the outbreak. Occupiers will need to
balance space efficiency with employee health and
safety considerations, which may lead to slower growth
in space requirements.
Stronger Demand for Buildings with Sustainability
and Wellness Features
Occupiers will place a stronger emphasis on building
specifications as they strengthen their commitment to
employee health and wellness. Properties with
sustainability and wellness features, particularly those
related to indoor air quality, ventilation systems, water
drainage systems and other indoor environmental
features to improve employee comfort, will attract
stronger demand in the long term. This could potentially
hasten the development of more LEED and WELL-certified
buildings. As of February 2020, there were about 700
certified and registered WELL commercial projects
providing a total of 219 million sq. ft. of space in Asia
Pacific, of which over 40% are in China.
Reviews of Business Continuity Planning
The outbreak will force companies to reassess Business
Continuity Planning (BCP), particularly the need to
maintain back up locations for critical business functions
and essential employees. Some companies may consider
the formation of alternate teams of employees (e.g. Team
A & Team B) to be deployed on different schedules and
at different locations during future outbreaks. Occupiers
will also need to ensure adequate supply of protective
equipment such as disposable gloves and masks. On the
landlord side, improvements to building hardware will
need to be made, such as the installation of medical
grade air purifiers.
Greater Importance of Property and Facility
Management
Property management will become more prominent. At
the individual tenant level, greater sensitivity towards
hygiene will require more frequent and rigorous
sanitisation of the office environment, particularly of
shared areas such as canteens and bathrooms along with
hardware such as phones and keyboards. Hygiene
concerns will require office managers to ensure high
standards of cleanliness are maintained while
communicating this to employees.
Asset managers – particularly of properties that include
shared amenities such as cafes, retail and agile space –
will need to augment existing hygiene policies to reassure
tenants and employees. Features such as temperature
checks at entry doors or thermal imaging systems –
introduced by many buildings since the outbreak – may
become standard procedure during flu season. Regular
cleaning and disinfection in public areas, better control of
people flows and the provision of isolation zones will
become more important. Office landlords may also
consider providing medical updates and communications
via tenant engagement platforms and social media – an
approach successfully deployed by some of the retail
landlords in recent weeks - to keep building occupants
informed of the latest developments during future
outbreaks. The complexity of facilities management in an
office building is likely to eventually resemble that in a
small shopping mall.
THE LONG-TERM IMPACT
OFFICE
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Growing Popularity of Online Groceries
With brick-and-mortar stores in Greater China and
Singapore having been forced to curtail their business
hours or close completely, shoppers have gone online for
daily necessities. This had led to a boost in online grocery
and fresh food sales – a trend that is set to hasten the
growth of this format and support the expansion of
omnichannel supermarkets such as Freshippo and
7Fresh. While a continuation of this trend will provide
solid support to e-commerce growth, it will create
additional headwinds for traditional brick-and-mortar
outlets that do not have an omnichannel presence.
Brick-and-Mortar Stores to Support Last Leg
Delivery
Relatively under-served e-commerce markets such as
Hong Kong have also seen a jump in online sales, which
may signify the beginning of a long-term fundamental
shift to an online economy. E-commerce platform
HKTVmall reported a 64.7% y-o-y surge in average daily
orders in January, while average daily gross merchandise
value (GMV) on order intake for the same month rose
49.6% y-o-y to HKD 10.9 million13
. HKTVmall is also
reportedly working with its merchant partners to set up
pick-up points in their stores – a trend that could simplify
the last leg of the supply chain should it gain traction in
the long-term.
Social Commerce Set to Gain Momentum
The shift to e-commerce will place even greater pressure
on retailers and landlords to offer unique and engaging
shopping experiences – either via interactive formats or
omnichannel strategies - to attract shoppers and sustain
sales growth in the long term. Live-streaming – an
increasingly popular format combining entertainment and
e-commerce – can help retailers foster a “see now, buy
now” culture enabling them to quickly inform consumers
about their products and create a sense of urgency to
purchase. Intime Department Store in China has
partnered with hundreds of Key Opinion Leaders (KOL) to
host livestreaming sales events during the outbreak14
.
Ultimately retailers will need to develop their ability to sell
their products and provide their services without a
physical store. As well as online grocers and fresh food,
other industries such as medical doctors and educational
centres have been forced to operate online during the
outbreak, to varying degrees of success.
Property Management to Be A Key Focus
CBRE expects the outbreak to strengthen the importance
of property management in shopping malls and retail
stores in the coming years. Hygiene and other measures
to ensure facilities are safe and clean for employees and
customers will be top of mind. Permanent measures may
include providing hand sanitiser at entrances and more
regular cleaning of goods or locations frequently touched
or used by shoppers.
13Hong Kong Television Network Limited [link], February 10, 2020.
14 Xinhuanet [link], February 12, 2020.
THE LONG-TERM IMPACT
RETAIL
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Relocation and Diversification of Production
Bases to Accelerate
Rising labour costs in China and the U.S.-China trade
conflict have already prompted many global
manufacturers to diversify supply chains to other markets
in Asia such as Vietnam, Thailand, Indonesia, India,
Bangladesh and the Philippines. CBRE believes the
outbreak and the significant disruption it has caused to
the supply chain will prompt more manufacturers to
consider this long-term shift as companies look to reduce
reliance upon a single market and avoid
overconcentrating production in one location. However,
the complete exodus of manufacturing capacity from
China is unlikely given the sophistication of the industry,
the maturity of the supply chain and the huge domestic
consumption market.
E-commerce Demand to Drive Additional
Warehouse Requirements
CBRE had already identified e-commerce as the main
tailwind propelling the logistics sector in 202015
.
However, with the outbreak prompting a jump in online
sales and expediting the structural shift towards
omnichannel retailing, additional warehousing space in
and around major metropolitan areas will be needed to
meet the surge in last-mile delivery.
Cold Storage Demand to Surge
Niche industrial and logistics assets will also benefit in the
long-term, with growing consumption and omnichannel
distribution of groceries and fresh food set to accelerate
occupier demand for cold storage facilities in the
coming years.
Automation to Transform Warehouses and
Distribution Centres
The adoption of new technologies in the logistics space
is likely to receive added impetus. Delivery companies
have sought to work around quarantine regulations by
using Automated Guided Vehicles (AGVs) to provide
contactless delivery. JD.com has reportedly delivered
goods using drones in Hebei province during
the outbreak16
.
While return on investment remains a major
consideration, more logistics providers may consider
automating some of their operations to reduce reliance
on human employees and protect against disruption
caused by future outbreaks. This will transform the way
operators configure and build their warehouses and
distribution centres. For those logistics facilities that do
continue to host large numbers of human employees,
hygiene and sanitation will need to be improved.
15 CBRE Asia Pacific Real Estate Market Outlook 2020
16 Nikkei Asian Review [link], February 12, 2020.
THE LONG-TERM IMPACT
INDUSTRIAL & LOGISTICS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
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CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
Core Assets to Remain Defensive Plays
Interest rates are expected to stay lower for longer as
central banks reintroduce accommodative monetary
policy – a trend that will support real estate pricing.
Although yields for prime core assets remain low, well-
located high quality assets will be able to withstand short-
term market weakness. The lower interest rate
environment will ensure the yield spread remains
attractive. Prime core assets are set to remain ideal
defensive plays.
Cold Storage and Data Centres Enter the
Mainstream
Cold storage is seeing robust demand on the back of the
surge in online grocery and fresh food sales. A recent
report published by CBRE found that while there exist
several barriers to investment in the sector, build-to-suit
or forming partnerships with cold storage developers and
operators are viable entry routes for investors17
. Cold
storage-focused real estate funds may also emerge
in future.
Data centres – already the subject of strong investor
interest18
amid the growing importance of Big Data,
Industry 4.0, Internet of Things (IoT) and the mainstream
adoption of cloud-based services – are likely to take on a
more prominent role, should companies decide to allow
employees to work from home more regularly. This would
drive cloud storage demand and data usage, boosting
data centre fundamentals.
Older Logistics Facilities Offer Redevelopment
Opportunities
The increasing use of automation in logistics facilities will
make it more difficult for older properties to secure
tenants and accelerate their drift towards obsolescence.
This could lead to redevelopment opportunities for
older assets.
Retail is here to stay
While retail is set to experience severe short-term
headwinds, CBRE believes the sector remains an
attractive long-term investment opportunity. The ongoing
transformation of shopping centres into experience
centres will require strong operational expertise. This will
create more opportunities for investors possessing solid
retail experience as competition for retail asset will be
less intense.
Integration of Sustainability into Investment
Strategy
With more occupiers placing greater importance on
employee health and wellness, properties with LEED and
WELL certification will attract stronger demand. Investors
will increasingly focus on high quality properties with
these attributes or incorporate sustainability and wellness
criteria in their value-added strategy to ensure their
properties align with this long-term trend.
17Asia Pacific Cold Storage: An Investor’s Guide, CBRE Research, July 2019
18CBRE’s 2020 Investor Intentions Survey found that data centres were the most popular alternative sector. 30% of respondents stated they are actively
pursuing investment opportunities in this sector compared to19% in 2019.
THE LONG-TERM IMPACT
INVESTMENT
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
16
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Figure 6: Common Long-Term Impacts Across Different Sectors
Greater importance of
property management
Dispersion of locations for
work and production due to
risk diversification
Further growth of online
retail and last-mile logistics
Stronger demand for cold
storage amid online grocery
boom
Preference for buildings with
wellness and sustainability
features
Long-Term Impacts
High impactLow impact Medium impact
Office RetailIndustrial &
Logistics Investment
THE SHORT-TERM IMPACT
THE LONG-TERM IMPACT
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
17
CBRE RESEARCH | ASIA PACIFIC SPECIAL REPORT © 2020 CBRE, INC.
MARKET SHORT-TERM ECONOMIC IMPACTS
Mainland
China
• Growth will slow in H1 2020 but rebound in H2 2020. CBRE’s full-year GDP forecast has been
revised down from 6.1% to 5.6%.
• The People’s Bank of China (PBoC) injected RMB 1.2 trillion worth of liquidity into the market via
reverse repo operations on February 3 and lowered the 1-year Loan Prime Rate (LPR) by 10 bps
and 5-year LPR by 5 bps on February 20. The China Securities Regulatory Commission (CSRC)
issued a circular forbidding short selling in the A share stock market.
• Additional measures in the pipeline include tax reductions and exemptions for impacted
industries; further interest rate cuts; and specific policy support for Wuhan and Hubei.
Hong Kong
SAR
• GDP growth is expected to stay negative in H1 2020 due mainly to the residual impact from
2019 sociopolitical unrest and the coronavirus outbreak.
• Retail, food and beverage, trade and tourism are under the greatest pressure. Should the
outbreak be prolonged, the overall unemployment rate will climb noticeably in Q2 2020,
particularly in these industries.
• Some IPOs scheduled by Mainland Chinese firms in H1 2020 may be postponed to later in
the year.
Taiwan • The overall impact on the economy is expected to be short-lived.
• In addition to a possible decline in commodity exports, exports of services are expected to drop
due mainly to the slump in tourism.
• Taiwan’s Directorate General of Budget, Accounting and Statistics recently revised its GDP
forecast for 2020 down by 0.35 percentage points to 2.37% y-o-y.
Singapore • Although Singapore's manufacturing sector exhibited some early signs of recovery in Q4 2019,
this is likely to be curtailed, especially with mainland China being one of the country’s largest
global trade partner (13.4% of total trade). However, Singapore is well diversified with many
trade partners and therefore the impact will be cushioned.
• The Ministry of Trade & Industry has revised its 2020 GDP growth forecast to between -0.5%
to 1.5%.
Japan • The February consensus forecast for Q1 2020 GDP is 0.3% y-o-y (annualised basis), which is
21bps below January’s consensus.
• Some economists are forecasting negative growth for Q1 2020, which would mean two
consecutive quarters of negative growth following Q4 2019, which was down 6.3% q-o-q. The
decline in Q4 2019 was mainly due to recoil from front-loaded demand in Q3 2019 before the
consumption tax hike, as well as weather-related factors including typhoons and a warm winter.
• The decline in inbound demand from Chinese tourists has already resulted in a double-digit
sales decline in Japanese department stores during the Lunar New Year holiday. Pressure on the
retail sector is expected to increase as domestic consumption sentiment will further dampened by
the rising number of infected cases in addition to the most recent consumption tax hike in
October 2019.
• Delays to factory production in China have negatively affected Japanese manufacturers’
supply chains.
APPENDIX 1
ECONOMYSUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
18
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MARKET SHORT-TERM ECONOMIC IMPACTS
Korea • The economic impact of the coronavirus outbreak has been felt far quicker than that during MERS
five years ago.
• Korea's growth rate will drop due to sluggish exports overlapping with the shrinking domestic
demand caused by fewer tourists. The Bank of Korea (BoK) recently announced it would lower its
2020 GDP growth forecast by 20bps to 2.1% due to signs that COVID-19 is weighing on growth
in H1 2020.
• The electronics and semiconductor sectors have been hit hard as China is the largest importer of
Korean semiconductors.
India • The overall impact will be limited unless the outbreak lasts longer than anticipated. CBRE expects
the Indian economy to record growth of 5.6% in the present year and a notch higher next year.
• The major economic headwinds are the crisis in the shadow banking sector as well as a dip in
both consumption demand and private sector investment.
• A slowdown in China and a serious disruption to supply chain linkages could impact sectors such
as electronics, engineering goods, pharmaceuticals and chemicals. China is India’s largest
trading partner and an impact on imports could lift costs if traders look for alternate sources.
Australia • The outbreak is set to impact the Australian economy due to China being Australia’s biggest
export market as well as a key source of tourism arrivals.
• Chinese constitute 30% of overseas students in the country, which will be detrimental to the
income of universities and providers of student accommodation.
• Direct inbound flights from China have been banned until March 29 and restrictions exist on
international travelers who have recently visited China. Coupled with recent bushfires, the retail
and hospitality sector will experience a challenging year in 2020.
• The government has introduced a AUD 76 million recovery package to assist the tourism industry
New Zealand • After what was expected to be improving GDP growth in 2020, New Zealand’s economy will be
adversely impacted, mainly through the export and supply chain channels.
• At a sectoral level, while China only accounts for 11% of tourists, in certain accommodation and
F&B markets its influence is significant and the banning of flights from China is having a sizable
impact. The impact is also severe in the foreign education sector.
Vietnam • Exports may decrease by as much as 20% in Q1 2020, equivalent to a 44bps decrease in
quarterly GDP, according to The Ministry of Planning and Investment (MPI). The MPI says GDP
may decrease to 6.27% in 2020.
• Many local manufacturers have temporarily ceased production since January as spare parts and
raw materials for cellphones, computers, appliances, vehicles, apparel and footwear are heavily
dependent on imports from China.
• Vietnam is also overly-dependent on China as an export destination for major agricultural
products such as rice, fruit and rubber.
Thailand • With exports and tourism being Thailand’s top contributor to GDP, the outbreak will have a
significant impact on growth and sentiment.
• Chinese tourists accounted for almost a third of Thailand’s tourist arrivals in 2019. This heavy
reliance on one market has shown its downside as many resort destinations have seen a
significant drop in tourist numbers.
• GDP growth in 2020 has been revised down by many financial institutes to under 2% from the
previous forecast of 2.5%-3.5% earlier this year.
APPENDIX 1
ECONOMY (CONTINUED)
SUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
19
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APPENDIX 2
OFFICESUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
MARKET IMPACT
LATEST 2020 GRADE A
RENTAL FORECAST
(AS OF FEBRUARY 2020)
CBRE VIEW
Mainland
China
Medium Beijing: -1.3%
Shanghai: -4.0%
Guangzhou: 0%
Shenzhen: -4.5%
• The outbreak has significantly curtailed business
operations. Leasing activity is expected to slow in Q1
2020, with many occupiers – especially those in
severely impacted industries such as catering, retail
and transportation – likely to delay decisions involving
large scale CapEx.
• The degree of impact on individual cities will vary
based on the severity of infections.
• Provided the virus can be largely contained within
Hubei province, its impact on the national office
leasing market – except for Wuhan – will be short-
lived. Leasing activity is likely to recover as early as late
Q2 2020, supported by the accelerated opening up of
the financial sector to foreign participation.
Hong Kong
SAR
Medium -10.0% • New demand from Mainland Chinese firms will
contract further until the outbreak is curtailed. Vacancy,
which is as low as 3.4% in the Central submarket,
coupled with underlying shadow space will take longer
to backfill. However, limited new supply in 2020 will
provide some comfort to landlords.
• The rental decline will likely accelerate in H1 2020,
resulting in a frontloaded full-year decline of at least
10%. Decentralised areas will be more resilient.
Taiwan Low 2.3% • CBRE retains its forecast for rental growth and net
absorption this year on the back of stable leasing
demand for quality offices. In addition, the absence of
new supply will ensure vacancy remains at historical
lows during 2020.
• Selected multinationals may delay leasing decisions in
the short term.
Singapore Low 0% • There were significant declines in Grade A (Core CBD)
rents during the SARS and H1N1 outbreaks. These
however can be attributed to poor financial timing as
they occurred after the dotcom bubble (SARS) and
GFC (H1N1).
• The market is expected to remain resilient, with the
outbreak having only a limited impact. Low vacancy
will keep office rents stable in 2020.
• The impact is likely to kick in after the effects of the
outbreak weigh on the output levels of the
manufacturing and services sectors, which could
possibly impact short-term growth.
20
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APPENDIX 2
OFFICE (CONTINUED)
SUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
MARKET IMPACT
LATEST 2020 GRADE A
RENTAL FORECAST
(AS OF FEBRUARY 2020)
CBRE VIEW
Japan Low Tokyo: -0.1% • The impact will be limited as major office markets
remain upbeat. There continues to be strong
demand among tenants to move to larger and new
premises or improve their office environment.
Korea Low Seoul CBD: 0.6% • Deals in progress are proceeding as planned at the
moment.
• Office leasing demand is expected to weaken as the
situation escalates. The suspension of site visits will
lengthen the decision process. Some occupiers
previously considering relocation will likely consider
postponing their plans or extending their leases in
their existing building.
• Cost is now a top priority and more occupiers are
considering cheaper buildings first.
India Low Gurgaon (Core): 1.0%
Mumbai BKC: 1.7%
Bangalore ORR: 4.5%
• Office leasing demand has been unaffected. Robust
leasing continues to be supported by an
improvement in domestic economic sentiment and
sustained appetite among U.S. and other EU based
corporates for outsourcing their business operations
to India.
Australia Low Sydney: 1.7%
Melbourne: 2.3%
• Any impact on the office sector will be minimal.
While some decisions might be put on the
backburner, tenants won’t think too much about the
impacts of a virus - which should be temporary -
when making an occupancy decision that will last for
5-10 years.
New
Zealand
Low Auckland: -0.3% • A direct impact on demand could occur in the
education sector which is a significant player in the
market for Secondary CBD office space.
• Anecdotal reports are emerging of supply chain
impacts on the office market resulting from delays in
the production and shipping of goods from China
for fit-outs.
Vietnam Low Hanoi: 1.0%
HCMC: 1.4%
• There will be a limited impact as leasing demand
from Chinese occupiers is still very modest.
• A spillover effect may emerge as office occupiers
adopt a cautious approach towards expansion,
relocation and expenses should their business be
affected by the outbreak.
Thailand Low Bangkok: 3% • The impact from the outbreak will be minimal.
Demand is more dependent on the Thai economy,
which has caused many tenants to delay expansions
or relocations.
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APPENDIX 3
RETAIL SUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
MARKET IMPACT
LATEST 2020 RETAIL
RENTAL FORECAST
(AS OF FEBRUARY 2020)
CBRE VIEW
Mainland
China
High Beijing: 0.1%
Shanghai: 0%
Guangzhou: 0.2%
Shenzhen: -0.2%
• Large-scale closures of shops and shopping malls
will pull down retail sales growth to around 6.0%.
• Around 20% of new projects due for completion
this year have been delayed, with further
postponements possible.
Hong Kong
SAR
High -20.0% • Street shop vacancy is set to climb further but
shopping mall occupancy will be less affected.
• The rental decline will likely be frontloaded to H1
2020 and will be less apparent in the second half
of the year due to the lower base of comparison.
While shopping mall performance should be
relatively resilient, CBRE has revised down its
2020 core submarket street shop rental forecast
to a 20% decline.
Taiwan Medium 0% • Restaurants are expected to be hard hit in the short
term as more consumers avoid public places and
dining out.
• Several shopping malls reported a drop of 30%+ in
footfall in the second week of February. However,
selected retailers with omnichannel capabilities, such
as beauty brands and grocery retailers, have
reportedly posted double-digit y-o-y growth in sales
revenue since the outbreak.
Singapore High -2.0% • Prime retail rental forecasts have been downgraded
to -2.0% from the previous -1.0% in 2020. The
tourism-reliant Fringe and Orchard submarkets are
likely to be the most affected, while the performance
of the suburban market is expected to remain
resilient supported by solid domestic spending.
• The Budget included measures to alleviate the strain
on retail and F&B by providing a 15% rebate on
property tax.
• Retailers that trade goods made in China could
come under pressure as their inventories will steadily
diminish due to supply chain disruption.
Japan Medium Tokyo(Ginza): -0.4% • While CBRE has been forecasting a moderate
drop in Tokyo high-street rents for 2020, the risk is
to further downside given the likely drop in
inbound tourists and exacerbated weakness in
domestic consumption.
22
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APPENDIX 3
RETAIL (CONTINUED)
SUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
MARKET IMPACT
LATEST 2020 RETAIL
RENTAL FORECAST
(AS OF FEBRUARY 2020)
CBRE VIEW
Korea Medium Seoul: N/A • Retail has suffered the strongest impact. Sales will be
hit in the short-term and a few openings have been
delayed or even cancelled, including Louis Vuitton’s
new pop-up store.
• Major large retailers are likely to suffer in Q1 2020,
with many hypermarts temporarily closed after visits
by COVID-19 sufferers.
• One landlord recently agreed to a short-term rental
reduction and relief scheme for a tenant upon
request. Further cases are likely to be witnessed in
the coming weeks.
India Low N/A • There has been no material impact thus far. Both
physical retail and online retail continue to witness
growth in key retail markets as more global retail
brands enter and expand.
Australia Low Sydney: 0.9%
Melbourne: 0.4%
• The outbreak will adversely impact revenue in the
hotel and retail sectors, diminishing returns in 2020.
• Luxury brands and F&B will be significantly impacted,
especially up-scale Asian. Some of these tenants
will likely ask for rental abatements (reduced rents
over a certain period) which will reduce landlords’
bottom lines.
New
Zealand
Low Auckland: -2.1% • The outbreak will affect the hotel and retail industries
and weigh on performance this year. Luxury retail
and F&B will be hardest hit.
Vietnam Medium Hanoi: -1 to -2%
HCMC: -1 to -2%
• Sales will be hit in the short term, with F&B and
entertainment most vulnerable.
• Retailers are generally in wait-and-see mode, which
has led to a significant fall in site visit and enquiries.
This will increase challenges around pre-leasing
for new malls.
• Some retailers are asking landlords to cut rents by
up to 50% or even waive rents for the duration of
the outbreak.
Thailand Medium Bangkok: 0 -1% • While overall rents might not drop, the rental model
could change to a gross profit format especially
in an environment where shopping mall footfall
is declining.
• Same-store-sales among major retailers in Bangkok
were falling even before the outbreak due to the
growth of food delivery services and worsening
pollution.
• The Consumer Confidence Index in January 2020
fell to its lowest point in 70 months but this was
largely due to the economic slowdown.
23
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APPENDIX 4
INDUSTRIAL & LOGISTICS SUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
MARKET IMPACT
LATEST 2020
LOGISTICS
RENTAL FORECAST
(AS OF FEBRUARY 2020)
CBRE VIEW
Mainland
China
High Beijing: 3.5%
Shanghai: 3.0%
Guangzhou: 3.0%
Shenzhen: 3.0%
• Given Wuhan’s status as a national strategic
transportation and manufacturing hub, there may be
disruption to supply chains – a situation that could
worsen if the virus is not prevented from spreading to
other major urban hubs.
• The impact on logistics leasing demand in logistics
sector has been relatively limited.
Hong Kong
SAR
Low -5.0% • Third-Party Logistics (3PL) firms that focus on general
trade and retailers are suffering the most. Some
retailers may have downsizing requirements.
• New and expansionary demand is expected to be
limited. On a more positive note, medical product
suppliers and e-commerce portals may require
temporary space should the outbreak last for an
extended period.
• Despite the uncertainty, low vacancy and limited new
supply will prevent rents from freefalling. A low single
digit decline is expected to result from more
surrender cases and downsizing requirements.
Taiwan Medium N/A • Disruption to supply chains will affect mainland
China-based Taiwanese manufacturers with
integrated supply chains across the region. This
may also prompt some Taiwanese manufacturers
to accelerate reshoring to Taiwan and/or
other countries.
• Demand for logistics facilities will likely increase as
e-commerce prospers.
Singapore Medium 0.0% • Exports, especially electronics, are experiencing
downward pressure. However, the pharmaceuticals
sector could benefit and support GDP.
• Weaker Chinese demand for imports and some
factory shutdowns will be detrimental to Singapore
given its position in the regional supply chain as an
exporter of intermediate goods to China.
• Factory rents are likely to see a further erosion within
a range of 3.0% to 4.5% y-o-y while warehouse
rents are expected to remain flat due to the limited
supply pipeline.
24
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APPENDIX 4
INDUSTRIAL & LOGISTICS (CONTINUED)
SUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
MARKET IMPACT
LATEST 2020
LOGISTICS
RENTAL FORECAST
(AS OF FEBRUARY 2020)
CBRE VIEW
Japan Medium Greater Tokyo: 0.7% • The main impact is the disruption to the supply chain.
• There is likely to be greater online consumption, and
higher interest for logistics, where there may be further
cap rate compression.
Korea Medium Greater Seoul: 0% • Korea has been impacted by supply chain disruption.
However, online commerce has benefitted, which
could drive additional demand for logistics and
warehousing facilities.
• A major fresh food delivery companies’ sales have
doubled y-o-y.
India Low N/A • The outbreak is unlikely to have a major impact, with
the logistics sector witnessing robust growth due to
supply side incentives and promotion from the
government and demand from local and global 3PLs,
e-commerce firms.
• Manufacturing could be affected, as China is India’s
largest trading partner. A serious disruption of supply
chain linkages might force traders to look for alternate
markets for sourcing both raw materials as well as
finished products which will impact costs.
Australia Low Sydney: 2.5%
Melbourne: 2.0%
• Any impact will be at the margins and is unlikely to
impact occupier decisions.
New
Zealand
Low Auckland: 2.6% • There is some impact emerging mainly in the food
manufacturing sector and in the supply chain around it.
• With exports to China being negatively impacted by
the outbreak there is increasing demand for cold
storage, with New Zealand’s cold storage network
reportedly at capacity. Flow on impacts around
production cut backs are starting to appear.
Vietnam High N/A • Supply chain disruption is happening as imported
manufacturing inputs from China account for 35% of
total imported manufacturing inputs in Vietnam.
• The outbreak has further contributed to weakening
interest in local industrial sector from occupiers in
Greater China. Enquiries had already dropped
significantly after the U.S. and China signed the
Phase-One trade agreement and Vietnam tightened
regulations to prevent tax evasion.
Thailand Low 0% • Supply chains for many manufacturing plants has been
impacted as raw materials needed for the production
are from China.
25
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APPENDIX 5
INVESTMENTSUMMARY OF SHORT-TERM IMPACTS ON KEY MARKETS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE
MARKET IMPACT CBRE VIEW
Mainland
China
High • Real estate investment is expected to slow significantly in the short term as business
activity declines and non-essential meetings and travel are cancelled.
• Highly-leveraged developers and landlords could come under significant pressure.
Real estate debt will remain an attractive investment option.
• Investors will strengthen their focus on gateway cities and assets providing steady
income streams.
Hong Kong
SAR
High • Transaction volume will likely see a noticeable drop in Q1 2020. Should the
outbreak last in Q2, investment demand will remain limited for another few months.
• Investment demand will weaken temporarily but the limited future supply across most
property sectors remains unchanged.
• Property prices are not expected to experience a sharp decline on the back of lower
financial costs but yield will need to move out to offset climbing economic risks.
Taiwan Low • Reshoring by Taiwanese manufacturers will create investment demand for industrial
properties and industrial sites.
• Domestic investors are showing new interest in logistics facilities in view of robust e-
commerce growth.
Singapore Medium • Investment is expected to moderate due to the outbreak and the limited stock for sale.
• Singaporean investors will remain active in overseas markets.
Japan Low • There may be an increase in enquiries from cross-border investors given the reduced
business activity in China and Hong Kong.
• An increase in the number of COVID-19 cases is unlikely to impact domestic
investors’ appetite, nor would it negatively affect their mid-to long term appetite for
overseas investment.
Korea Low • The outbreak has yet to affect inbound and outbound investment flows. Investors
continue to seek assets and negotiate deals. In some cases, the transaction process
may be lengthened due to travel restrictions in some countries.
• Hypermarkets and entertainment-related retail properties may suffer from a short-term
reduction in rental income, leading to a decrease in investment sentiment. The
disposal of hypermarkets by public REITs may be impacted.
India Low • Demand remains stable and foreign investors continue to search for opportunities.
Several Asian investors and developers have been seeking commercial and residential
development opportunities for the past couple of years.
Australia Medium • There may be an impact on real estate transactions until COVID-19 is contained,
with some investors preferring to defer sales until travel restrictions are lifted and
confidence returns to normal.
New Zealand Medium • The lower propensity for travel by Asian investor appears to be an emerging
constraint in marketing to this investor group. Property sectors where this investor
typology is a major source of demand may see some impact as a result.
Vietnam Medium • There have been fewer enquiries from cross-border investors in the first two months of
2020, especially those from China, Japan and Korea, due to travel restrictions.
Thailand Low • The impact will be minimal because Thailand is mostly driven by domestic capital.
However, travel restrictions could cause some delays to activity by overseas investors.
ABOUT THIS REPORT
Henry Chin, Ph.D.
Head of Research,
APAC/EMEA
Ada Choi, CFA
Head of Occupier Research,
Asia Pacific
Head of Research,
Greater China
Jonathan Hills
Senior Director,
Asia Pacific
Richard Barkham, Ph.D., MRICS
Global Chief Economist &
Head of Americas Research
Neil Blake, Ph.D.
Global Head of Forecasting and Analytics
EMEA Chief Economist
Henry Chin, Ph.D.
Head of Research, APAC/EMEA
Spencer Levy
Chairman Americas Research & Senior
Economic Advisor
CBRE RESEARCH
This report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research – a network of preeminent researchers who collaborate to provide
real estate market research and econometric forecasting to real estate investors and occupiers around the globe.
All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections,
has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no
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© 2020 CBRE, Inc.
GLOBAL RESEARCH LEADERSHIP
Cynthia Chan
Office Specialist,
Asia Pacific
Liz Hung
Retail & Logistics Specialist,
Asia Pacific
Leo Chung, CFA
Capital Markets Specialist,
Asia Pacific
FOLLOW CBRE
APPENDIX 5
CONTACTS
WHY THE CORONAVIRUS (COVID-19) OUTBREAK
COULD HAVE A LASTING IMPACT
ON ASIA PACIFIC REAL ESTATE