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Singapore commercial real estate investment volume drops 68% y-o-y in 1Q2020

/ EdgeProp Singapore |

May 11, 2020 3:15 PM SGT

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SINGAPORE (EDGEPROP) - Commercial real estate investment in the Asia Pacific contracted 26% y-o-y in 1Q2020, as the Covid-19 pandemic impacted the flow of capital into many industries and asset classes. According to data by JLL, investment transaction volumes in the region came in at US$34 billion during this period.

Commercial property investments in Singapore, Hong Kong, and mainland China were the most adversely affected last quarter, with activity declining by at least 60% y-o-y. However, investment activity in South Korea and Japan was similar or slightly higher compared to the same period a year ago.

In Singapore, commercial investment volumes declined by 68% y-o-y last quarter. Investors spent more time on asset management and paused capital deployment, and their caution was influenced by heightened recession risks and the lack of flagship assets on the market.

Recent activity includes Alibaba’s acquisition of a 50% stake in Singapore’s AXA Tower for $1.7 billion from a Perennial-led consortium of investors. It is one of the biggest property deals the Chinese giant has made outside China.

The 50-storey AXA Tower was once the tallest skyscraper in Singapore when it was completed in 1986 (Photo: Perennial Real Estate)

According to Stuart Crow, CEO of capital markets at JLL Asia Pacific, “the decline in Asia Pacific transaction volumes in 1Q2020 was widely expected, given the impact of the Covid-19 situation. Many investors have paused activity due to the uncertain economic environment”.

The most significant contraction was in the retail sector, which declined by 39% y-o-y, while the most resilient asset class was industrial and logistics, which saw investment activity grow by 9% y-o-y.

Investment volume for office assets fell by 36% y-o-y last quarter, despite high demand from offshore and domestic investors, and large-scale office asset sales in mainland China, Japan, and South Korea.

In Singapore, investors spent more time on asset management and paused capital deployment. (Picture: Pixabay)

Hotel transactions also moderated by 22% y-o-y, and the sector was also aided by some deals that were finalised in the earlier part of 1Q2020 in Japan and South Korea.

Crow expects the reduction in investment activity to continue in 2Q2020, but says that trading volumes could bounce back more strongly in 2H2020. “There are many well-capitalised investors waiting for opportunities, and we think the dislocation in the markets will create strong deal flow across most sectors,” he says.

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