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Along with the improving COVID-19 situation in Hong Kong and the return to normal economic activity, market sentiment has improved, with a higher level of leasing activity in the office market. Most of the new leases in Central were premises of no more than 10,000 sq ft, while isolated new leases of larger areas were found outside the CBD area. With no quick escape in sight for COVID-ravaged economies, many tenants continued to look for costsaving solutions, which include rental abatement, rental deferment or lease restructuring to ease their financial pressure. But rental reductions were seen mainly for office tenants with a retail presence and were implemented only on a case-by-case basis.
COVID-19 impacts are being felt across the REIT space. However, sectors will be impacted differently by both COVID-19 itself and the behaviors and measures that will be taken to address the outbreak. While at the time of this writing, REITs are likely oversold, pricing in the REIT market is diverging between property types, which could point to the future direction of private market values.
Please find the constituent changes to the GPR/APREA Indices, which will become effective as of 22 June 2020 (start of trading).
The COVID-19 pandemic has brought much of the world and many of the key gateway markets in Asia that we discuss in this paper, to a near standstill. It has been an almost domino effect, where the health crisis has led to an economic and financial crisis. However, out of crisis can emerge new and interesting opportunities, as can be seen in the GDP forecast for 2020 and 2021, with China and Hong Kong, in particular indicatively forecasting the widest jump of over 700 bps – a clear indication of economic growth potential and the opportunities that will come with it.
Despite the slowdown in real estate markets accelerating across most of the world into the second quarter of the year, acquisition trends in two key global cities, both in China, have turned positive. Global volumes started to wane around March this year, but the weakness in Asia Pacific had already been apparent for some time, as all of the region’s top 10 metros suffered double-digit declines in the first quarter. In contrast, more than half of the key metros in Europe and the U.S. recorded an increase in transaction activity, as economic shutdowns and travel restrictions were implemented later in the quarter.
India Real Estate: What changed due to Covid-19?
1. Raw material supply chains disrupted
• Construction requires more than 200 items
• Dependence on China for elevators, steel, etc.
• Limited availability and possible hike in raw material prices
We are presently living in unprecedented times and Covid-19 has – in more ways than one – altered the way we live, think, work, or even socialize with people around us. However, there lies an opportunity in every crisis and Covid-19 looks no different. All industries including Indian real estate are now diligently working to innovate and strategize their business. Among the key noticeable trends already, Indian residential sector is all set to embark on a different growth trajectory with ‘home ownership’ gaining significant preference among the new-age millennials, probably because it renders high level of security.
Investment in China’s commercial market was already proving challenging towards the end of 2019 as fundamentals that had supported demand were softening while new supply was pushing up vacancy rates in many markets. This, combined with low yields, made underwriting deals problematic unless there was significant add-value or specific area support, such as new infrastructure or master planning.
Rent growth was solid in both the C5W and the 23W, with the latter leading the way over the quarter and year. That said, given current market conditions, growth looks likely to pause until the impact of COVID-19 becomes clearer.
• Rent growth in the Tokyo 23 wards (23W) was solid during Q1/2020. Rents now stand at JPY4,155 per sq m – an increase of 2.7% quarter-on-quarter (QoQ) and 5.8% year-on-year (YoY).
• A verage mid-market rents in the central fi ve wards (C5W) continued their ascent towards JPY5,000. They are now at JPY4,928 per sq m after growth of 1.8% QoQ and 5.4% YoY.
• T he C5W saw its premium over the 23W average contract to around 19%. Elsewhere, discounts widened in most other submarkets.
Kemmu Kawai joined Longevity Partners Japan in September 2022 as the Country Director. Based in Tokyo, he oversees all operations and activities in Japan, the Asia-Pacific region and beyond. He brings him more than 16 years of experience in finance where he specialised in real estate and credit investments. Before joining Longevity Partners, he served as a Portfolio Manager at Norinchukin Bank and as Investment Manager at Center Point Development.
Kemmu Kawai
Managing Director
Longevity Partners
