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Commercial property transaction volumes in Asia Pacific fall 14% in 2Q2020

By Charlene Chin

/ EdgeProp Singapore |

July 8, 2020 5:16 PM SGT

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SINGAPORE (EDGEPROP) - Commercial property transaction volumes in Asia Pacific have fallen 14% q-o-q in 2Q2020, according to Knight Frank’s Asia Pacific research team.

On a y-o-y basis, commercial transaction volume in Asia Pacific fell by 41% to US$55 billion ($76.7 billion) in 1H2020.

In Singapore, domestic commercial transaction volume fell 87% year-on-year in 1H2020 to US$0.55 billion. However, cross-border transactions were less affected by the pandemic, with US$7 billion transacted to overseas investors - just 12% lower y-o-y.

Knight Frank says that Australia remains a key market for outbound Singapore-based capital: transaction volume from Singapore to the country was up 72% y-o-y in 1H2020, although volume remained low at US$1.39 billion.

“Singaporean government-linked companies have remained active investors in Australia this year, executing their long-term strategies of moving into core logistics and office assets,” observed Neil Brookes, head of capital markets, Asia Pacific, at Knight Frank.

Meanwhile in Hong Kong, outbound capital investing in commercial assets fell 66% y-o-y in 1H2020 to US$3.1 billion. However, in 2Q2020 alone, transaction volumes were up 48% q-o-q, suggesting a strong appetite for overseas assets, says Knight Frank.

“Hong Kong investors continue to show a keen interest in diversifying their portfolios overseas. Once travel restrictions lift, we expect that Hong Kong outbound investment will increase,” says Paul Hart, executive director, head of commercial for Greater China at Knight Frank.

Trends

Knight Frank has also observed that corporates have been adopting a sale and leaseback strategy, seeing an enquiries spike from companies that own corporate real estate across sectors such as automotive, electronics, media, retail and technology.

“Companies, institutions and governments are increasingly selling real estate assets and leasing them back, as a way of shoring up their balance sheets in the face of the economic volatility caused by the coronavirus,” explains Brookes.

Some property sectors have also maintained deal momentum across Asia Pacific. The industrial sector recorded a 11% drop in transaction volumes y-o-y in the last quarter, compared to a drop of 44% across all other sectors.

At the same time, Asian REITs have remained globally competitive. REITs in Singapore witnessed a drop of about 7% year-to-date, compared to their counterparts which saw a sharper drop of around 34% in Europe, and 25% for UK-listed REITs.

Knight Frank also expects that investors are waiting for distressed opportunities to arrive in the later part of the year. As at December 2019, it estimates that Asia Pacific-focused private equity funds had about US$38 billion of capital ready to deploy in Asia Pacific, well above the US$5 billion that was raised in 2007 and 2008 before the Global Financial Crisis.

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