Cushman & Wakefield Marketbeat

Asia Pacific Commercial Real Estate Markets Set for Severe but Short-Lived Blow From COVID-19 Outbreak

  • Domestic demand in Indonesia to cushion some of the impact to tourism and the retail sector
  • China CRE markets to be hardest hit with negative impacts expected to ripple through all sectors with retail, leisure and hotel to bear the brunt
  • Longer term fundamentals for the Asia Pacific CRE space remain intact

China’s commercial real estate markets will be the most disrupted in Asia Pacific by the COVID-19 outbreak, although, in the short-term, tourism and retail markets across the region will feel a serious impact from reduced visitor numbers from the mainland, according to Cushman & Wakefield’s Potential Impacts of the COVID-19 Pandemic on Commercial Real Estate in Asia Pacific report.

Expectations are that the economic impact from the COVID-19 outbreak will be limited to the first half of 2020 and the longer-term fundamentals for Asia Pacific commercial real estate markets are expected to remain intact.

Domestic market in Indonesia to cushion impact in the short term

To date, the World Health Organisation (WHO) has not listed Indonesia on its tally of countries outside of China which have recorded cases of the COVID-19 virus. As such, any impact on the Indonesian market will largely come from the measures taken by the other Asia Pacific markets that have reported cases or are affected by the outbreak.  

Hotel Sector

Various tourist destinations such as Bali, Yogyakarta and Bintan, are experiencing delays and cancellations of hotel room bookings, which is likely to impact occupancy rates. To date however, the impact of the COVID-19 on tourism has not been significant because it is still the low season cycle of January-March. The impact may well worsen during the mid-year holiday period if the coronavirus becomes more widespread in Indonesia and/or is not well managed locally, though this may be somewhat counter-balanced by additional domestic demand from those who decide to vacation locally rather than travel overseas. For Jakarta, inbound business-related travel is also expected to be affected due to regional and international corporate travel-restrictions.

Commercial Office Market

The impact of this coronavirus has also begun to be felt in the office market in Jakarta in the field of construction, where several office buildings that are being built using foreign workers and/or contractors (including those from China) whose travel/return to Indonesia after the Chinese New Year holiday has been delayed. This will slow down the completion of those particular projects. In addition, office leasing transactions by multi-national companies are also seeing some decision delays, especially for those awaiting headquarter decisions from coronavirus-affected countries


To date, Indonesia’s Ministry of Trade has assessed that the coronavirus (COVID-19) has had no significant impact on retail merchandise availability. The Indonesian Retail Entrepreneurs Association (Aprindo) said the impact of the coronavirus was more related to sales volumes, despite relatively little change in the number of visitors to retail centers in Jakarta thus far. 

David Cheadle, Managing Director, Indonesia, said: “Beyond the short-term impact, Indonesia continues to see a rapid expansion in its population. Cushman & Wakefield’s latest Demographic Report forecasts a demographic windfall in Indonesia with especially high population growth in the 25- to 55-year age range and a low rate of population aging. Jakarta has been enjoying increasing activity in the industrial sector as corporates’ China+ manufacturing strategies (expanding into countries outside of China) start to accelerate. These economic fundamentals will not change, albeit with some delay as a result of the slight ‘blip’ in progress because of the current disruption. Indonesia is forecast to see employment in the industrial sector increase at four times the pace of growth in total employment over the next decade.”

James Shepherd, Head of Research, Asia Pacific, stated: “In China the impact of the COVID-19 outbreak is clearly visible, and the cost of containment via mitigation measures is slowing economic activity and productivity nationwide. Across Asia Pacific, tourism and retail markets are at risk of serious damage in the short-term, with inbound tourists and students from mainland China facing travel restrictions. We can expect to see investment activity in the retail and hospitality sectors to slow across the region until the outbreak eases. However, longer-term we do not see major restructuring given the recent reweighting of international real estate investment capital to Asia Pacific markets.”

Dr. Dominic Brown, Head of Insight and Analysis, Asia Pacific, added: “In the short-term we can see that the economic damage impact caused by the COVID-19 outbreak is likely to be more severe than the SARS epidemic of 2002-03, at least in the short term, both for mainland China and for markets around the region. China has risen in importance on the global stage with regard to supply chains and tourism flows, and the stronger impacts are a reflection of that. However, with the Chinese government’s decisive response to the outbreak, we can anticipate that the most significant economic impacts may be constrained to the first half of 2020. Longer-term, we remain confident that the fundamental strengths of the commercial real estate space in Asia Pacific will remain intact.”

Key takeaways from Potential Impacts of the COVID-19 Pandemic on Commercial Real Estate in Asia Pacific:

  • Economists are reaching a consensus that global GDP growth will fall by approximately 0.2-0.3 percentage points in 2020, with the greater impact on China ranging from approximately 0.4 percentage points to 1 percentage point.
  • Domestic consumption in China, through retail and travel, is expected to be hardest hit.
  • Wider Asia Pacific effects are likely to be seen through reduced regional tourism flows and supply chain disruption from mainland Chinese suppliers.
  • The Chinese government’s strong response in addressing the spread of COVID-19, its recent RMB 1.7 trillion (approx. US$242.8 billion) injection into the economy and other possible future measures supports mid to long term market confidence.
  • China domestic retail expenditure, especially on travel, luxury retail, leisure and restaurants, will weaken in the short term, but e-commerce may receive a boost.
  • Potential CRE impacts include:
    • Reduced leasing and investment transaction activity in China for at least Q1 2020, although we expect property investment activity to recover in the medium-term; 
    • Immediate negative impact on short-term leasing and co-working activity; 
    • Prompt action by corporates is demonstrating strengthened business continuity planning (BCP) since SARS, the success of which may accelerate a move to more flexible working arrangements over the longer term;
    • Lower outbound tourist numbers will negatively impact tourist expenditure and hotel occupancy across much of Asia Pacific;
    • Hampered industrial production due to shutdowns and quarantine in mainland China and supply of components to global markets; and 
    • Potential benefits to logistics sector on the back of increased e-commerce.

Potential Impacts of the COVID-19 Pandemic on Commercial Real Estate in Asia Pacific has been compiled by the Cushman & Wakefield Asia Pacific research team to help clients better understand the current and future impact of the COVID-19 outbreak on commercial real estate. It analyses the status of the outbreak as at Feb. 18, 2020.

About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit or follow @CushWake on Twitter.

Click HERE to view the full report.

Latest news

Related news