REIT ASIAPAC
COVER STORY
HONG KONG / CHINA:
PATRICK MA,
Research Director, Admiral Investments
01
Transaction volume for China’s commercial property market
slowed substantially in 1Q 2020, but we still see strong interests
from overseas investors, especially in Tier-1 cities. Some of
the significant deals during the period included Blackstone’s
proposed US$4 billion general offer for SOHO China, Hongkong
Land’s US$4.5 billion commercial development project at Xuhui
district in Shanghai, and Singapore GIC’s US$1.2 billion acquisition
of LG Twin Towers in Beijing. In addition, although China‘s office
market remains under pressure, there is emerging demand from
sectors such as insurance, healthcare, and technology-related
sectors. We also expect the Chinese government to push for
further monetary and fiscal stimulus to reflate the economy.
TOKYO, JAPAN - February 28, 2020: Passerby looks at screen displaying
Japanese stock prices at Naito Securities branch on a street in Kayabacho.
JAPAN:
02
JUNNOSUKE SHINKAWA,
Senior Fund Manager, Asia Pacific Listed Real
Estate, Sumitomo Mitsui DS Asset Management
(Singapore) Pte. Ltd
01
TOKYO, JAPAN - March 15, 2020: Akihabara district, a crowd of people in medical masks walks along the street.
JAPAN:
logistics and residential J-REITs performed relatively better due
to cash flow visibility, J-REITs with hotel exposure corrected
significantly and are trading almost up to 60% discount to
appraisal net asset value.
DANIEL FELDMANN,
Senior Analyst at Timbercreek
01
How have Japan REITs fared after the Bank of
Japan’s J-REIT purchasing programme?
02
What are your concerns
going forward?
For the upcoming months, it will be pivotal to gain an
understanding of the stability of master-leases related to
hospitality or retail operators and the change in office market
conditions to regain confidence in the sector. An interesting
behaviour seen from sell-side J-REITs analysts is that few had
taken immediate action on target prices while others have kept
their target prices unchanged despite the Covid-19 disruption.
A massive sell-off driven primarily by domestic financial
institutions led the TSE REIT Index to correct by over 49% peak-
to-trough within less than a month to March 19th, 2020.
A strong signal from the BOJ in doubling the J-REIT purchasing
program from JPY 90 trillion to JPY 180 trillion supported the
TSE REIT Index recovery in the second half of March 2020. While
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How is the health of China’s commercial
property sector?
Are there any buyers for
Hong Kong properties?
Despite pressure on commercial rents, we still see selected
acquisitions by local investors. The commercial property market
has been under pressure, especially retail properties. Hong
Kong has already seen its 2019 real GDP fall 1.2%, with markets
expecting a deepening recession ahead.
What is the impact of the State of Emergency
declared by the government?
The emergency declaration by the government is not enforceable,
and as such, Japan will take time to control the spread of Covid-19.
Since J-REITs would gradually feel the impact of the economic
downturn as a result of prolonged social distancing measures, we
will have to remain vigilant about potentially high volatility in the
J-REIT market going forward.
02
Which sectors will
do well?
For sector preference, we prefer the logistics sector the most. We
have a more conservative view of rental housing and the office
sector because of the weak growth outlook. For the office sector,
there is a risk that occupancy will decline in case the pandemic
prolongs until the second half. For retail and hotel sectors, the
impact is the most, and the stability of the EPU (earnings-per-
unit) will be the most severe even if their DPU is maintained
through internal reserve.
BEIJING, CHINA - Twin LG Towers on Jianguomen Avenue
7