Recovery in Investment Activity from COVID-19 Delayed
This note updates our Flash Report of 3 March. Following the lessons of SARS in 2003, we assumed activity in APAC real estate capital markets would rebound from the impact of COVID-19 from late Q2 or early H2 2020. However, the global spread of COVID-19 implies this rebound will be pushed back three to six months.
Initial Q1 2020 investment volumes are predictably weak: the APAC total fell 62% YOY to USD17.0 billion. However, we see bright spots in the region such as major investments in China, and strength in Singapore and in second-ranked centres like Yokohama. This gives us confidence that price corrections for APAC markets will stay within a reasonable range.
Economic growth forecasts for 2020 have fallen fast since early March. However, historical examples suggest growth may recover rapidly in late 2020 and 2021. Quicker economic recovery should help drive a pick-up in property deal volumes.
Among top investment markets in APAC, the COVID-19 outbreak has peaked in China, which is slowly returning to normal. Conversely, disruption has risen since early March in Australia, Singapore, and most recently Japan. Against this background, our preferred asset classes are detailed overleaf.