Asia-Pacific 1st Qtr Real Estate Investment Plunged By 26% Amid Pandemic; Bounce Expected

Investment in Asia-Pacific commercial real estate plunged by 26% during the first quarter of 2020 as the spread of COVID-19 hurt businesses, according to global real estate consultancy JLL.

Mainland China, an early pandemic epicenter, was among the hardest-hit areas, suffering a decline of 62% year-on-year. Hong Kong was even worse: total first-quarter transaction volumes fell by 74% year-on-year, JLL said on Friday.

That in turn has cut into the fortunes of many of the region’s richest real estate developers. In Hong Kong, shares in Lee Shau Kee flagship Henderson Land and Li Ka-shing flagship CK Hutchison Holdings have each lost 25% of their value in the past year.  Shares in Evergrande Group, led by  mainland China’s richest real estate developer Hui Ka Yan, have lost more than 30% in the past year at the Hong Kong Stock Exchange.

“We see this reduced activity continuing into the second quarter, with trading volumes likely to bounce back more strongly in the second half of the year,” said Stuart Crow, CEO, Capital Markets, Asia Pacific at JLL. “There are many well-capitalized investors waiting for opportunities, and we think the dislocation in the markets will create strong deal flow across most sectors.”

The trio of mainland China, Hong Kong, and Singapore were the most adversely affected markets in Asia Pacific, with investment activity declining by at least 60% year-on-year, JLL said.  South Korea and Japan were the least impacted — investment was similar or slightly higher year-on-year

All types of commercial real estate were hit by COVID-19.  Retail investment volume had the worst regional drop, falling 39% year-on-year due to lockdowns and safe-distancing measures. Industrial and logistics property was the Asia Pacific’s most resilient asset class in the first quarter, with activity growing by 9% year-on-year.

“The full impact of the COVID-19 outbreak on the investment market will hopefully start to become clearer in the second quarter as investors focus on existing portfolios and bide their time for the right opportunities,” said Regina Lim, Executive Director, Capital Markets Research, Asia Pacific, JLL.

“However, as business activities in mainland China have gradually returned to normalcy in March, and some economies in the region have managed to avoid a complete lockdown, we believe a material drop off from this quarter level would be unlikely,” Lim said.

Click here for a Chinese-language version of this post

@rflannerychina