CUHK Business School Research Finds Rents In Asia-Pacific Have Fallen Dramatically, But House Prices Have Stayed High During Pandemic | Taiwan News

HONG KONG SAR – Media OutReach – December 2, 2021 – Empty office buildings, hotel rooms and shopping malls – these are the facts of life in the post-pandemic new normal. They are also the result of social distancing measures as well as government-imposed lockdowns implemented around the world to reduce the spread of COVID-19, the effects of which have rippled through real estate markets in Asia. With this in mind, a recent study found that overall market house prices for much of the Asia-Pacific region have remained stable. However, within the various real estate segments, the market has seen a refocus of some investors towards strategies involving the deployment of capital to sectors of the industry that have effectively benefited from COVID-19.

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The COVID-19 Pandemic and Commercial Property Rent Dynamics study was co-authored by Dr Ervi Liusman and Professor Desmond Tsang, lecturer and associate professor respectively at the School of Hotel and Tourism Management at the Chinese University of Hong Kong (CUHK) Business school. Based on data from global real estate consultancy JLL, the study examined rental figures and real estate prices for 38 cities in 12 countries and jurisdictions in the Asia-Pacific region, including Hong Kong, Singapore. , Tokyo and Kuala Lumpur. The real estate sectors included office, retail, industrial and residential. They then analyzed the evolution of rents and real estate prices in the regions.

According to the study, rents for properties in these areas have fallen by about 15% on average in the Asia-Pacific region in the first six months of 2020, coinciding with the onset of the pandemic. Office rentals registered moderate declines of around 14%. However, the largest and most ongoing rent drops were seen in commercial properties, such as shopping centers, which fell more than 30% during the period. The study found a negative relationship between the number of confirmed COVID-19 cases and deaths and market rents in the region. Interestingly, real estate prices in the global market have not fallen despite the drastic drop in rents.

Flight to quality

According to study results and anecdotal evidence, real estate prices across the Asia-Pacific region have remained high despite the surge in COVID-19 cases, with less emphasis on investment in the retail trade and more in the residential and industrial real estate sectors.

At the onset of the pandemic, researchers say social distancing measures and lockdowns implemented in response to the pandemic forced people to stay at home and consequently led to an e-commerce boom at the expense of demand. in physical retail stores. Many stores have also had to close and without stable rental income, and owners or investors have become more likely to sell commercial properties in their portfolios. This simultaneous movement of supply and demand has resulted in a significant drop in retail property prices.

In response, investors redistributed their capital allocation strategies within the overall real estate market, adopting more defensive strategies amid the pandemic, the researchers said. That is, they have reallocated funds to areas that can better withstand the uncertainties brought by the pandemic, such as investing in data centers, factories and warehouses. Given the protracted COVID-19 pandemic, it was only natural that many investors were concerned about the possible prospects for the commercial real estate market, which is why they chose to put their money in other real estate sectors.

“What we are seeing could be a ‘flight to quality’ phenomenon, where investors abandon risky assets such as commercial properties and choose to invest in more secure options, such as data centers or warehouses,” explains Dr Liusman. “The demand for real estate is derivative demand, which means that it is based on the demand for something else, and people always need space for production and consumption. As consumers shift their shopping to e-commerce, online businesses will need space to run their businesses as well as logistics, hence the brighter prospects for industrial real estate as well as other types. non-commercial real estate. “

She adds that supply in the industrial property sector has remained tight with robust demand. Ecommerce platforms, tech and telecommunications companies, food and beverage operators, and pharmaceutical companies – all of which need industrial warehouse and factory space to run their operations – were probably the driving force behind the strong demand observed in this sector.

Government intervention

To cope with the unprecedented crisis caused by the COVID-19 pandemic, governments around the world have implemented various support programs to restore their economies, as shown in a report released by the International Monetary Fund.

The researchers investigated fiscal stimulus packages implemented by governments in Asia-Pacific countries. For example, China announced tax measures estimated at 4.9 trillion Chinese yuan, including tax breaks and a reduction in social security contributions. The researchers looked at how different stimuli affected different markets in the Asia-Pacific region.

They found that government tax incentives had a positive effect on reducing real estate rent cuts. However, they also found that this positive effect had already faded by the time the announced measures were implemented. They explained that the government’s fiscal stimulus packages appear to be effective in mitigating the negative impact of the pandemic, but it appears to be working at least as much in helping restore confidence in the housing market as the financial side of the measures themselves. same.

“It would appear that it was the announcements of these big tax stimulus programs that weakened the rent cuts. This means that the initial response from governments may be what matters more to restoring investor confidence than what governments actually do. to help savings, ”says Professor Tsang.

Bargain hunt

The researchers believe the results of their research may provide valuable implications for how the pandemic has affected the global real estate environment. “Due to the diverse nature of real estate, the impact of the COVID-19 pandemic has varied considerably by region and sector. While some real estate sectors like retail and hotels may have been negatively affected by the pandemic, other sectors were relatively stable, ”says Dr Liusman. “As an investor, it is important to consider the market demand for a particular sector when selecting the investment portfolio.”

Dr Liusman notes that while times of economic crises generally provided good opportunities for investors to hunt for bargains, during the current pandemic, property owners in the global market have avoided cutting prices to unload their assets. She explains that one of the reasons may be due to the government’s fiscal stimulus packages helping to restore investor confidence. Another possibility is perhaps because these building owners had deep pockets and did not feel the urgency to sell their properties.

Commenting on future directions for the research, the researchers said further research could focus on how the real estate market has responded to the recovery from the pandemic. Further research may also consider examining any potential relapse into the real estate market due to the discovery of variants of the COVID-19 virus.


Allan R, Liusman E, Lu T, Tsang D. The COVID-19 pandemic and the dynamics of commercial property rents. Risk and Financial Management Journal. 2021; 14 (8): 360.

This article was first published on the China Business Knowledge (CBK) website of CUHK Business School:

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