How will COVID-19 affect commercial real estate in Asia Pacific?

The novel coronavirus outbreak, first reported from Wuhan city in Hubei province, central China, represents a new downside risk for the regional economy.

The first case of the coronavirus, now formally named COVID-19 by the World Health Organization, was reported on Dec. 31, 2019, and there have since been multiple developments with the virus and much speculation on the impacts.

To help better understand the current and future impact on commercial real estate in key markets in Asia Pacific, Cushman & Wakefield has compiled their initial guidance and analysis in our Potential Impacts of the COVID-19 Pandemic on Commercial Real Estate in Asia Pacific report.

Here are the key takeaways from the report:

1. There are differences in the likely severity and duration of the economic damage for different countries in Asia Pacific, but the views of economists are moving towards a consensus on the impact on global GDP.
2. Domestic consumption in China, through retail and travel, is expected to be hardest hit.
3. Wider Asia Pacific effects are likely to be seen through reduced regional tourism flows and supply chain disruption from mainland Chinese suppliers.
4. The Chinese government’s strong response in addressing the spread of COVID-19, including a recent RMB 1.7 trillion injection into the economy and other possible future measures supports mid to long term market confidence.
5. China domestic retail expenditure, especially on travel, luxury retail, leisure and restaurants, will weaken in the near-term, but eCommerce may receive a boost.
6. Potential CRE impacts include:a. Reduced leasing and investment transaction activity in China for at least Q1 2020, although we expect property investment activity to recover in the medium-term;b. Immediate negative impact on short-term leasing and co-working activity;c. Prompt action by corporates is demonstrating strengthened business continuity planning (BCP) since SARS, the success of which may accelerate a move to more flexible working arrangements over the longer term;

   d. Lower outbound tourist numbers will negatively impact tourist expenditure and hotel occupancy across much of Asia Pacific;

   e. Hampered industrial production due to shutdowns and quarantine in mainland China and supply of components to global markets; and

   f. Potential benefits to logistics sector on the back of increased eCommerce.

Download the report here.