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NEW YORK—The Coronavirus has impacted global property marketsaround the world, with the greatest disruptions in the resort andhospitality sectors, retail real estate, commercial office and to alesser extent, industrial properties. As the US moves to reopen itseconomy, it is instrumental to see how commercial real estatesectors across Asia have fared to date.

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GlobeSt.com caught up with Cliff Moskowitz, EVP with NewYork-based NAI Global. He recently moderated a virtual panel withNAI offices in Australia, New Zealand, South Korea and thePhilippines.

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"I was encouraged to hear what was happening on the ground inSeoul. As we hear, South Korea is ahead of us on the 'curve' andwhile certain precautions are in place, it was refreshing to hearthat business is being conducted even so far as business dinnerswhere people sit around the table and converse without masks," hesays. "It shows there is a light at the end of the tunnel and it isjust a matter of when we get there."

Australia

Australia seems to already have government-mandated guidelinesin regards to rent relief for commercial tenants with a specificformula, Moskowitz adds. "It will be interesting to see if similarrules are applied here in the US and what they might looklike."

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That formula for rent relief and adjustment, according to JasonLuckhardt, National Manager with NAI Harcourts Australia, islargely based on the percentage of lost revenue for eachbusiness.

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"Early on the federal government established a code of conductfor commercial property owners which was handed down to statePremiers (governors) to administer and there has been widespreadcooperation between landlords and tenants to reach rental rateagreements without engaging the courts," Luckhardt said.

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Luckhardt said New South Wales has been hit the hardest by thevirus and while they have not experienced office market rental ratedeclines yet, he expects they will down the road. When the recoveryin Australia does begin—and Luckhardt expects unemployment to maxout around 10%, it will likely come from agriculture and mining,with perhaps new investments in the country's western capital,Perth, which will suddenly benefit by its isolation from the restof Australia as well as its closer proximity to the Philippines andother South Pacific markets.

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One pleasant surprise thus far is that US investment inAustralian commercial real estate is only off 5%, and the US is thebiggest foreign investor in Australian property, according toLuckhardt.

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It's worth noting that real estate in Australia is considered anessential business, whereas in New Zealand, which is about 1,400miles southeast across the Tasman Sea, real estate is not anessential business and therefore the industry is temporarilyfrozen.

New Zealand

"New Zealand closed its borders to everyone except NewZealanders returning home as soon as the pandemic was declared andup until the week of April 27 we have been in a stage 4 lockdownfor a month so we couldn't show property, regardless of assetclass, and there is zero tourism so the hospitality industry hasbeen severely impacted," said Tony Kidd, general manager with NAIHarcourts New Zealand. The island nation has four levels ofshelter-in-place, with 4 being complete lockdown except foressential services and number 1 being normal, open society.Beginning the week of April 27 New Zealand went to a state 3lockdown, which opened up some businesses but showing propertyremained substantially restricted.

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With a total population of 4.9 million, Kidd said the countryhad been reporting 80-90 new virus cases per day as recently asearly April but more recently it's been in the single digits. Theeconomic impact on closing the economy is consequently significantin New Zealand, with best-case unemployment to reach low-doubledigits, according to Kidd. Post COVID-19 and when the dust settles,Kidd anticipates that office vacancies will inevitably rise andthere will be a softening of yields across all sectors.

South Korea

In South Korea, which was hit hard with the virus in in lateFebruary, when about 500 new cases were reported daily comparedwith recent weeks, when fewer than 10 new cases have emerged daily,the economic shutdown cost about 195,000 Koreans their jobs inMarch, making it the sharpest payroll monthly decline since May2009, according to Ray Cho, a principal with NAI Korea. He saidlowering interest rates from the Bank of Korea is likely yet thatwould not benefit the property markets especially for retailproperties, which have experienced a 50+ percent drop in sales andthat transaction volume is off significantly for major deals.

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The Korean government is supporting landlords with up to 50%rent support for smaller retail tenants, Cho said, adding: "Goingforward, location will be more important as buyers and tenants willbe very conservative with site selections, however, buyers willrecognize that the best locations will be least affected withvacancies and may be willing to pay more for them because ofit."

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Cho said Koreans were widely cooperative and supportive ofslowing the spread of Coronavirus and because the country flattenedthe curve relatively quickly, the government has started openingthe economy, yet still encourages businesses to only haveface-to-face meetings if necessary. Even so, restaurants havereopened and Cho said they are doing robust lunch and dinnerbusiness.

The Philippines

The virus has all but stalled tourism in the Philippines aswell, yet Filipino economists expect unemployment to only climb to6.2% in 2020, compared with 5.1% at the beginning of this year,said Fausto Liriano, chairman and CEO of NAI RCL Philippines.

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Where COVID-19 is impacting the Philippines, Liriano said, wasthe gaming industry and office markets in Manila and othercities.

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"Pre-COVID, about 400,000 square meters (about 4.3 millionsquare feet) was projected to be absorbed by off-shore gamingoperators this year. However, the Enhanced Community Quarantine, orECQ (as the local government calls its shelter-in-place) hasdelayed construction and pushed back delivery of the office space.In turn, it is forcing the offshore gaming operators (most of whichare Chinese) to re-evaluate their leasing requirements," hesaid.

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Liriano also noted that although there is record-levelpre-leasing in office towers under construction that is broughtabout by demand from offshore gaming and companies involved inBusiness Process Outsourcing (BPO is a global industry providingnon-primary business functions on behalf of other vendors), anadditional 1 million square meters (about 10.7 million square feet)scheduled for delivery this year is at risk because of constructionstoppage. "This may result in higher vacancy rates by year-end asoccupiers reconsider their take up requirements."

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