CUHK Business School Research Finds Rents in Asia-Pacific Fell Dramatically but Property Prices Stayed Strong During the Pandemic


HONG KONG SAR – Media OutReach – 2 December 2021 – Empty office buildings, hotel rooms and shopping malls – these are the facts of life in the post-pandemic new normal. They are also the results of social distancing measures as well as government-imposed lockdowns implemented around the world to lessen the spread of COVID-19, the effects of which have rippled across real estate markets in Asia. It is with this in mind that a recent study found that property prices in the overall market for much of the Asian Pacific region remained stable. However, within the different segments of the real estate, the market witnessed a refocusing from some investors towards strategies involving deployment of capital towards sectors of industry that actually benefited from COVID-19.

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The study The COVID-19 Pandemic and Commercial Property Rent Dynamics was co-written by Dr. Ervi Liusman and Prof. Desmond Tsang, Lecturer and Associate Professor, respectively, in the School of Hotel and Tourism Management at The Chinese University of Hong Kong (CUHK) Business School. Based on data from global real estate consultancy JLL, the study examined rental figures and property prices of 38 cities in 12 countries and jurisdictions in the Asia-Pacific region, including Hong Kong, Singapore, Tokyo and Kuala Lumpur. The property sectors included office, retail, industrial and residential. They then analysed the trends in rents and property prices in the regions.


According to the study, rents of properties across these sectors fell approximately 15 percent on average across the Asia-Pacific region in the first six months of 2020, coinciding with the beginning of the pandemic. Office rentals recorded moderate declines of approximately 14 percent. However, the most significant and continued declines in rent was found in retail properties, such as shopping malls, which fell over 30 percent in the period. The study found a negative relationship between the number of COVID-19 confirmed cases and deaths and market rent in the region. Interestingly, property prices in the overall market did not fall despite the drastic drop in rents.


Flight to Quality

According to the study results and anecdotal evidence, overall property prices in the Asia Pacific remained strong despite the surge in COVID-19 cases with less focus on retail investment and more and of a focus into the residential and industrial properties sectors.


At the start of the pandemic, the researchers say the social distancing measures and lockdowns implemented in response to the pandemic forced people to stay at home and consequently led to a boom in e-commerce at the expense of demand in physical retail stores. Many stores also had to close down and without stable rental income, and landlords or investors became more likely to sell retail properties in their portfolios. This simultaneous movement in both sides of supply and demand meant retail real estate prices saw a significant drop.


In response, investors redistributed their capital allocation strategies within the overall property market, taking more defensive strategies amid the pandemic, according to the researchers. That is, they reallocated funds to sectors that can better withstand the uncertainties brought by the pandemic, such as by investing in data centres, factories and warehouses. Given the prolonged COVID-19 pandemic, it was natural for many investors to have concerns about the eventual prospect of the retail property market, which is why they chose to put their money in other property sectors.


“What we are seeing could be a ‘flight to quality’ phenomenon, where investors are abandoning risky assets such as retail properties and choosing to invest in safer options, like data centres or warehouses,” says Dr. Liusman. “Demand for real estate is a derived demand, which means it’s based on demand for something else, and people still need space for production and consumption. With consumers shifting their purchases to e-commerce, online companies will need space to run their businesses as well as for logistics, hence the rosier prospects for industrial as well as other types of non-retail property.”


She adds that supply within the industrial property sector has remained tight with robust demand. E-commerce platforms, technology and telecommunication companies, food and drinks operators and pharmaceutical companies – all of which require industrial warehousing and factory space to run their operations – were likely to have been the driving force for the strong demand witnessed in this sector.

Government Intervention

To deal with the unprecedented crisis brought by the COVID-19 pandemic, governments worldwide have implemented different support programmes to restore their economies, as shown in a report published by the International Monetary Fund.


The researchers investigated the fiscal stimuli packages carried out by governments in the Asia-Pacific countries. For instance, China announced an estimated 4.9 trillion Chinese yuan in fiscal measures, including tax relief and reduced social security contributions. The researchers examined how different stimuli affected different markets in the Asia Pacific region.


They found that government fiscal stimuli had a positive effect on reducing declines in property rents. However, they also discovered that this positive effect had already worn off by the time the announced measures got around to being implemented. They explained that government fiscal stimulus packages seem to be effective in mitigating the negative impact of the pandemic but this seemed to work at least as much through helping to restore confidence in the property market as the financial aspect of the measures themselves.


“It would seem that it is the announcements of those grand schemes of fiscal stimuli that weakened the fall in rents. What this means is that the governments’ initial response may be what matters more in restoring investor confidence than what the governments actually do to help the economies,” Prof. Tsang says.


Hunting for Bargains

The researchers believe that their research findings can provide valuable implications on how the pandemic has affected the global property environment. “Due to the diverse nature of real estate, the impact of the COVID-19 pandemic varied significantly across different regions and sectors. While some property sectors like retail and hotels may have been negatively impacted by the pandemic, other sectors were relatively stable,” Dr. Liusman says. “As an investor, it is important to examine the market demand for a particular sector when selecting the investment portfolio.”


Dr. Liusman notes that while periods of economic crises generally presented good opportunities for investors to bargain-hunt, during the current pandemic property owners in the overall market shied away from slashing prices to offload their assets. She explains that one reason may be due to the government fiscal stimulus packages helping to restore investor confidence. Another possibility is perhaps because those building owners had deep pockets and did not feel an urgency to sell their properties.


Commenting on future research directions, the researchers said further research could be focused on how the property market has reacted to the recovery from the pandemic. Additional research may also consider looking into any potential relapse in the property market due to the discovery of variants of the COVID-19 virus.



Allan R, Liusman E, Lu T, Tsang D. The COVID-19 Pandemic and Commercial Property Rent Dynamics. Journal of Risk and Financial Management. 2021; 14(8):360.


This article was first published in the China Business Knowledge (CBK) website by CUHK Business School:


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