COVID-19 pandemic brought the Asia Pacific regional economy to a sudden stop in
early 2020. Strict travel restrictions and social-distancing measures enforced by countries
across the region have been highly disruptive to economic and business activity. Most Asia
Pacific economies are now facing recession, and at the regional level, the International
Monetary Fund expects 2020 to represent the worst output growth recorded in 60 years.
The abrupt deterioration of the economic environment has put an end to the long-lasting
real estate cycle that started in Asia Pacific in 2010. Prior to the outbreak of COVID-19, the
low interest rate environment and positive tenant demand had been supportive to real estate
values and rental growth momentum across major markets. However, with leasing demand
now evaporating and investment activity slowing markedly, real estate markets across Asia
Pacific look set to suffer significant disruption in the near term.
Experience from previous downturns suggests that regional markets are less likely to move in
unison, and there is no reason for it to be different this time. The timing and momentum of
cycles vary across markets — for both downturns and subsequent upswings — courtesy of
diverse economic and real estate fundamentals regionally. All markets in Asia Pacific will be impacted, but severity will vary depending on property types and the pandemic situation in each country. While it is clear that there will be pain and uncertainty in the short term, significant policy responses from governments — notably in China, South Korea and Australia — have gone some way to reassure investors about the outlook. Just as the downturn is sharp and severe, the recovery that follows will likely be strong. The challenge for investors is to assess conditions and try to identify opportunities amid all the disruption.