Asia Pacific real estate investment activity registers significant COVID-19 impact in first half of 2020

Investment volumes in 1H decline 32% year-on-year, but healthy yield spreads mean appetite for assets remains high. Leasing markets subdued with some bright spots emerging

July 16, 2020

SINGAPORE, July 16, 2020 – The full impact of the COVID-19 pandemic was felt deeper in Asia Pacific real estate markets in the second quarter of 2020 than the previous quarter, contributing to investment volumes and rental prices declining across most major commercial asset classes in the first half of the year. According to newly released data by JLL (NYSE: JLL), first half investment volumes in Asia Pacific declined by 32% year-on-year, with second quarter activity down by 39% year-on-year accelerating from a 26% drop in the first quarter.

The decline in investment volumes continued as more economies introduced lockdowns and travel restrictions, further impacting investors’ short-term capital deployment plans. Singapore (-68%) and Hong Kong (-65%) registered the largest year-on-year investment declines in the second quarter, while drops in Australia (-58%), South Korea (-45%) and China (-15%) were offset by a resumption of activity in the latter parts of the second quarter. Investment activity in Japan (-20%) remained resilient due to transactions in the multi-family sector and strong domestic liquidity.

“The sharp decline in deal activity in the second quarter is reflective of the lack of willing sellers and the general uncertainty that exists around market recovery. Liquidity remains very high, and we expect transaction activity is poised to rebound in the second half as economies further reopen and pricing expectations are adjusted in certain markets,” says Stuart Crow, CEO, Capital Markets, Asia Pacific, JLL. 

Asia Pacific’s office sector continues to report the highest investment volume, supported by strong institutional investor appetite for core markets. Defensive and operation-critical assets - logistics, education and data centres – are also gaining attention from investors, leading to a flurry of fund raisings and new joint ventures. Deal activity for retail and hotels remained stagnant in the first half.

With interest rates declining in most major markets, JLL data show a healthy spread between prime yields and bond yields in most sectors in Asia Pacific, providing an attractive environment for global investors looking to deploy approximately $40 billion* in dry powder into the region.

Muted leasing activity

Across Asia Pacific, office leasing was generally subdued during the first half, with only select markets posting quarter-on-quarter price increases. Office rentals in Hong Kong’s Central district observed the most substantial decline (-9.3%) with the backdrop of rising vacancies and weaker leasing demand. Beijing (-4.1%), Melbourne (-3.9%), Sydney (-3.5%) and Singapore (-3.3%) also reported sizable declines in the office rental prices. Osaka and Seoul’s CBD office markets bucked the trend and outperformed in the second quarter, with rents rising 1% to 2%.

“Office leasing activity was relatively muted during the second quarter across Asia Pacific’s major markets, as heightened economic uncertainty influenced decision-making and lockdowns created inspection challenges,” says Jeremy Sheldon, Head of Markets, Asia Pacific, JLL. “While there were some relative bright spots in select areas, the market does remain unpredictable and all sides will be watching closely as the second half unfolds.”

Retail was the most severely impacted by lockdowns, travel restrictions and social distancing, curtailing demand throughout the second quarter. Hong Kong’s (-13.3%) retail leasing market posted the biggest decline across major Asia Pacific markets. Rents also declined across most of Southeast Asia, with Singapore (-8.5%) recording a significant moderation in prices.

The logistics and industrial sector proved the region’s most resilient in the second quarter. Rental growth remained positive in Shanghai (+1.2%) and Sydney (+1.0%) and was largely stable in Singapore, Beijing, Sydney and Melbourne.

“There is still significant uncertainty about growth and the shape of recovery amid the COVID-19 pandemic. Supply and demand remain the drivers of leasing performance and, inevitably, as markets continue to experience periods of lockdown, there is a direct impact on demand,” says Roddy Allan, Chief Research Officer, Asia Pacific, JLL. “The impact of COVID-19 will remain, but our research indicates investors will approach the market in the second half with measured optimism, which we believe will accelerate further in early 2021.”

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit