**Adapting to a Fast-Changing World: Economic and Real Estate Insights for Asia-Pacific in 2020**
In recent years, we have been reminded that Asia-Pacific has entered a late economic cycle, characterized by low economic growth. However, given the rapidly changing macroeconomic and geopolitical landscapes, CBRE emphasizes the importance of adaptability and flexibility for both investors and occupiers.
At the beginning of this year, we anticipated an improvement in global economic growth as trade tensions between the U.S. and China eased following the signing of Phase One deal. However, the outbreak of COVID-19 acted as a Black Swan event, disrupting business investments and significantly impacting global economic growth. While we hope that economic growth will recover in the second half of 2020 if the virus is contained, we have lowered our four-year GDP growth forecast for China to 5.5% and adjusted our projections accordingly.
In light of these challenges, companies are focusing on delivering profits and scrutinizing their spending. We expect office net absorption in Asia-Pacific to drop further from 2019 levels, with supply outstripping demand. This will give tenants an upper hand in negotiations, leading to weak office rental growth across most regions. Specifically, we anticipate rental corrections in mainland China and Hong Kong in the first part of the year, which may start to stabilize later on.
The outbreak of COVID-19 has prompted businesses to adopt continuity plans, including remote work arrangements for employees. This shift could accelerate the adoption of flexible working models in the long run. Additionally, sustainability and wellness features are becoming more important considerations when choosing office locations. Retailers must also demonstrate agility by serving customers both online and offline, as physical retail has faced significant disruption during the pandemic.
Despite these challenges, we believe that retail is here to stay. However, landlords and retailers need to upgrade shopping experiences by incorporating entertainment, interactive artistic, or educational elements. The impact of COVID-19 on retail and entertainment has been massive, prompting landlords in Greater China to launch rental reduction programs to support their tenants. Retail rents are expected to remain unchanged or decline in some markets.
In the capital markets, we continue to prioritize portfolio resilience by focusing on structural and defensive plays. There is significant liquidity in Asia-Pacific real estate investment markets, with fund managers leading purchasing activities. CBRE estimates that over $80 billion will be deployed over the next two years, with Australia, Japan, and China being key focus areas.
Looking ahead, interest rates are expected to remain low for an extended period. The low cost of borrowing means property owners are under less pressure to lower prices, resulting in significant pricing gaps. With low interest rates and strong liquidity, commercial real estate market yields are anticipated to remain low for longer. Investors should therefore adopt cyclical investment strategies and focus on structural opportunities.
We highlight a few investment opportunities to share with you:
1. **Highly Geared Chinese Developers**: We expect highly leveraged Chinese developers to dispose of assets in 2020 to meet payment obligations, creating attractive opportunities for fund managers.
2. **Retail Opportunities**: Despite retail falling out of favor among investors, shopping malls managed by experienced landlords continue to perform well. Long-term investors should consider purchasing retail properties under current market conditions, as they offer attractive risk-adjusted returns.
3. **Additional Demand in Key Sectors**: The quick adoption of 5G technology, an aging population, and the growth of online grocery sales are driving additional demand for certain sectors, such as data centers, cold storage, and multi-family housing.
In conclusion, adapting to the fast-changing world requires both investors and occupiers to remain flexible and strategic. By focusing on structural opportunities and leveraging emerging trends, we can navigate the challenges and uncertainties of 2020 and beyond.
"WEBVTTKind: captionsLanguage: enfor the year 2020 we have sets the theme as their to adapt in the fast changing world in the past few years we have been reminding ourselves that asia-pacific has entered the late economic cycle which means that we have low economic growth but given the fact that we are in a rapid changing environment in both macro economic and geopolitical landscapes CBRE emphases that both investors and occupiers should adapt and remain flexible at the beginning of this year we were expecting an improvement in original economic growth as a trade tension between US and China has been eased together with the phase one deal has been signed however the operator for coronavirus has dominated headlines that has act as a Black Swan through our global original economy growth the disruptions to the business investment if ities that we'll be sure left respect the economy growth were comes back in a second half of 2020 if the virus is well content however we lower our four-year GDP growth for China to five point five percent but original growth we also lower down our growth our forecast of 3.9% cop rates under such circumstances will focus on delivering profits and increase scrutiny on spending we expect office net absorption for asia-pacific to drop further from year 2019 supply will outstrip demand allowing tenants to stay at upper hand on the negotiation table office rental growth will remain weak in most parts of the region we also expect rental Corrections in mainland China and Hong Kong for the first part of the year and start to stabilize for the rest of the year companies have to adopt business continuity plans during the outbreak of kovat 19 and a lot of staff to work for home this could spur more Coptics to adopt our John working in the long run sustainability and wellness features could also become more important considerations when choosing a location for retailers agility would mean the ability to serve their customers both online and offline as we see substantial disruption to physical retail under the outbreak of covet line team retailers are swiftly discovering ways to promote their online platforms the overall logistics Dammam will tear for remain robust and continue to embrace teleological advancement for higher efficiency brands for high specification logistics facilities are expected to grow steadily we continue to believe that retail is here to stay despite the current challenges Leno's and retailers have to upgrade their shopping experience by introducing more entertainment interactive artistics or educational elements however the impact from covet line team is massive on retail and entertainment landlords are launching rental reduction programs in Greater China to alleviate the pressure from their tenants retail rents are likely to stay and changed or decline in some of the markets in the capital market size we continue to stress the layer portfolio resilience by focusing on structural and the defensive play first they are plenty of liquidity within asia-pacific real estate investment markets the purchasing activities is going to be led by found managers CBRE estimate over 80 billion u.s. dollars are from fund managers to be deployed over the next two years Australia Japan and China are their common focus second interest rate will stay low for longer the low cost of borrowing means as owners they will not be under pressure to lower our prices as a result pricing gap will remain significant the combination of a lower interest rate and strong liquidity means the yield for commercial real estate market is going to law for longer see really believes that investor should therefore underway they are cyclical investment procedures and to strengthen to focus on the structure opportunities we will actually love to highlight few invest my opportunities to share with you number one we are expecting to see highly geared Chinese developers to dispose the assigned 2020 in order to make their take payment this is going to be super attractive for opportunities they found managers although the retail has fallen out of favor among investors shopping malls and managed by experienced landlord continue to outperform if you're the long-term investors you should look into the opportunities to purchase retail under the current retail center vendor actually retail looks very attractive of all our wrists are adjusted returns and the quick adoption of a 5g aging population and the growth of online grocery sells actually create an additional demand on each sectors with particularly like data centers call storage and multi families youfor the year 2020 we have sets the theme as their to adapt in the fast changing world in the past few years we have been reminding ourselves that asia-pacific has entered the late economic cycle which means that we have low economic growth but given the fact that we are in a rapid changing environment in both macro economic and geopolitical landscapes CBRE emphases that both investors and occupiers should adapt and remain flexible at the beginning of this year we were expecting an improvement in original economic growth as a trade tension between US and China has been eased together with the phase one deal has been signed however the operator for coronavirus has dominated headlines that has act as a Black Swan through our global original economy growth the disruptions to the business investment if ities that we'll be sure left respect the economy growth were comes back in a second half of 2020 if the virus is well content however we lower our four-year GDP growth for China to five point five percent but original growth we also lower down our growth our forecast of 3.9% cop rates under such circumstances will focus on delivering profits and increase scrutiny on spending we expect office net absorption for asia-pacific to drop further from year 2019 supply will outstrip demand allowing tenants to stay at upper hand on the negotiation table office rental growth will remain weak in most parts of the region we also expect rental Corrections in mainland China and Hong Kong for the first part of the year and start to stabilize for the rest of the year companies have to adopt business continuity plans during the outbreak of kovat 19 and a lot of staff to work for home this could spur more Coptics to adopt our John working in the long run sustainability and wellness features could also become more important considerations when choosing a location for retailers agility would mean the ability to serve their customers both online and offline as we see substantial disruption to physical retail under the outbreak of covet line team retailers are swiftly discovering ways to promote their online platforms the overall logistics Dammam will tear for remain robust and continue to embrace teleological advancement for higher efficiency brands for high specification logistics facilities are expected to grow steadily we continue to believe that retail is here to stay despite the current challenges Leno's and retailers have to upgrade their shopping experience by introducing more entertainment interactive artistics or educational elements however the impact from covet line team is massive on retail and entertainment landlords are launching rental reduction programs in Greater China to alleviate the pressure from their tenants retail rents are likely to stay and changed or decline in some of the markets in the capital market size we continue to stress the layer portfolio resilience by focusing on structural and the defensive play first they are plenty of liquidity within asia-pacific real estate investment markets the purchasing activities is going to be led by found managers CBRE estimate over 80 billion u.s. dollars are from fund managers to be deployed over the next two years Australia Japan and China are their common focus second interest rate will stay low for longer the low cost of borrowing means as owners they will not be under pressure to lower our prices as a result pricing gap will remain significant the combination of a lower interest rate and strong liquidity means the yield for commercial real estate market is going to law for longer see really believes that investor should therefore underway they are cyclical investment procedures and to strengthen to focus on the structure opportunities we will actually love to highlight few invest my opportunities to share with you number one we are expecting to see highly geared Chinese developers to dispose the assigned 2020 in order to make their take payment this is going to be super attractive for opportunities they found managers although the retail has fallen out of favor among investors shopping malls and managed by experienced landlord continue to outperform if you're the long-term investors you should look into the opportunities to purchase retail under the current retail center vendor actually retail looks very attractive of all our wrists are adjusted returns and the quick adoption of a 5g aging population and the growth of online grocery sells actually create an additional demand on each sectors with particularly like data centers call storage and multi families you\n"
