Market Outlook

We expect a global economic recession to eventuate. The key question is how quickly the economy bounces back. This mostly depends on how rapidly COVID-19 is contained. We believe that real estate in general will see strong investor support in the medium term due to the increased need for yield alternatives given record low bond yields on one hand, and, even if the equity market bounces back, a desire for stable asset classes on the other.

The first couple of months of 2020 have been dominated by fears of the novel coronavirus’s impact on global economies and property markets. Historically, investors tend to become more cautious in their investment choices during periods of heightened uncertainty, and this year has been no exception in the Asia Pacific region. However, a closer analysis of Real Capital Analytics data shows that investor risk aversion had already been growing over the prior months.

• COVID-19: Comparable to GFC shock and bigger, but unlike GFC, is a socio-biological calamity-driven stress and  has  engulfed the entire world. Damage is physical and psychological.
• Global economic decline projected in upcoming quarters- loss of investor confidence, consumption slowdown, loss of jobs (World GDP growth could even fall to 0% in initial two quarters of 2020, on the lower side*).
• Post COVID-19, however, the world to witness large-scale transformation and business boost.

Heightened political tensions, along with the weak economy and the lingering impact of the COVID-19 pandemic, continued to affect business sentiment. Office tenants remained cautious and continued to seek downsizing and other cost-saving options, resulting in a 30% reduction in monthly rental costs because of downsizing and relocation since January 2020. In some sectors, such as banking and finance, office tenants put their plans on hold. Recent news about MNCs surrendered Grade-A office space highlighted the challenges office landlords face.

鉴于新冠疫情，房地产企业业务开展出现严重障碍和滞后，在财务领域带来一系列需要 应对的棘手问题。为协助房地产企业控制负面影响、做好业务持续发展规划、完善风险 管理机制和提升企业管理水平，毕马威凭借多年来服务于房地产企业财务税务领域的专 业经验，梳理了房地产企业近期应重点把握的财税问题和亟需开展的管理工作，供房地 产企业管理层、财务总监及财务负责人参考.

• From the fall of 2016, moderate expansion of Japan’s economy has continued. However, since 2018, the economy has turned to a stagnant trend and as of November 2018 it is in the midst of a moderate slowdown.
• Signs indicating a turnaround in the for-sale/transaction market for real estate in Japan, for example the decline in the contract rate of for-sale real estate and the bottoming out of transaction yields, are increasing. It appears that the market has already peaked out.

Conditions deteriorate amid more pessimistic outlook for global growth.

Respondents to the Asia Pacific Commercial Property Monitor indicated that conditions deteriorated significantly during Q3 of 2019…

Conditions deteriorate amid more pessimistic outlook for global growth.

Respondents to the Asia Pacific Commercial Property Monitor indicated that conditions deteriorated significantly during Q3 of 2019.

• Uncertainty surrounding global economy dampens the outlook for commercial property  
• Hong Kong sees sharp contraction in demand following months of political unrest
• Demand increasing at a slower pace than supply in a majority of markets

• Real estate cycle moves closer to the downturn phase
• Forward-looking indicators are still consistent with a ‘soft landing’
• European markets continue to display most resilient trend with more mixed signals across APAC

Tokyo remains one of the largest data center markets in the world, with an economy deeply rooted in finance, technology, and other sectors requiring heavy compute capacity. After a relatively slower end to 2018, Equinix, Colt, and the Mitsubishi and Digital Realty partnership all launched new projects in greater Tokyo with completions expected throughout 2020 and 2021.

The report comprises 4 sections covering

1. Market Conditions and Outlook

2. The Negotiation Process

3. Hot Topics for The Sector

4. Tenant Insights

Respondents spanned both sides of the market…

The report comprises 4 sections covering

1. Market Conditions and Outlook

2. The Negotiation Process

3. Hot Topics for The Sector

4. Tenant Insights

Respondents spanned both sides of the market, with Cushman & Wakefield surveying tenant representatives and landlords active in Australia’s Eastern seaboard office markets of Sydney, Melbourne and Brisbane.

SURVEY METRICS

In total there were 103 respondents, of whom 35 were tenant representatives and 68 were landlords. Respondents were active in the Sydney (43%) and Melbourne (36%) markets, with a smaller proportion active in Brisbane (21%).