Coping with the Coronavirus: It’s Impact on Tenants

February 20, 2020 | Commercial Real Estate

Here in Part One of our Coronavirus Series, we will analyse the impacts of the virus on office, retail and industrial tenants. In Part Two of our Coronavirus Series, we detail the impact of the coronavirus (COVID-19) on the global business environment.   The live dashboard above can be found here and is the most reliable way to track COVID-19 developments.

The Wuhan Coronavirus is constantly intensifying. Declared a world health emergency by the WHO, the virus has seen over 75 000 cases and 2 000 deaths globally. This led to a decline in various Asian markets such as China, Hong Kong and Singapore. The property sector has seen an especial impact.  In this article, we’ll be looking at the impact of the virus on tenants in office, retail and industrial properties in Asia.

Office

The virus has led to a challenging business environment which will hinder expansion in areas such as Hong Kong. The virus compounds the city’s existing social, economic and political issues, as many companies postpone business travel. With the city facing its first recession for two years in a row, the virus has led to a 2.8% decline in GDP growth and a 4% decline in the Hang Seng Index from a previous peak in January.

Office landlords all over Asia are targeting sectors with stable businesses such as insurance and pharmaceuticals. They are increasingly providing flexible or alternative lease terms – take advantage of these if you are seeking a new office! Hard-hit areas are being offered rent relief as people’s fears of the virus drive them to work from home.  Consider implementing flexible offices as alternatives as well, whether this be co-working spaces or simply working from home.

Retail

The retail sector will suffer the most. Many stores in the Asia Pacific are facing declining sales and hence foreclosure. Various major retailers have pulled out of China completely, including Apple and IKEA. With travel bans preventing ‘Mainlanders’, who surpassed the US as the world’s biggest consumer market in 2019, from visiting neighboring countries, many have faced a decline in their economies. Singapore has declared a ‘Code Orange’ on the outbreak, signaling heightened risk. ‘Mainlanders’ previously formed 20% of inbound tourism, and thus visitor levels are forecasted to fall by 30% in 2020. This led to numerous stores closing due to reductions in foot and walk-in traffic.  OG, a leading department store that announced they would close earlier than usual, and Habitat by HonestBee, the world’s first tech-enabled organic dining and grocery experience, closing permanently.

Hence, retail tenants should take advantage of low or rent-free alternatives being offered by landlords. To remain relevant, retailers can turn e-commerce solutions such as Facebook Lives for showrooms and bidding, and selling online.

Industrial

The least impacted sector is the industrial market, as e-commerce remains the dominant driver. Warehouse demand may increase for necessities such as food. Companies seek to preserve goods due to reductions in retail demand, causing cold chain logistic demands to boost. However, disruptions to supply chains may occur due to China’s position as a major manufacturing hub for various companies, as numerous factories close due to the outbreak.

Impacted by the virus? Contact Tenant CS now!

Tenant CS is an independent Asia-Pacific-based commercial tenant representation company. We help our tenant clients to source suitable premises and to negotiate the terms and conditions of their lease agreements.

We have offices in Singapore, Sydney and Melbourne, and are a part of a global network of tenant advisors, which means we can service clients all around the world! Contact one of our team members today to find out how we can help you.

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