Hong Kong, Singapore lead biggest pullback in Asia-Pacific commercial real-estate deals since 2008 financial crisis

By Cheryl Arcibalcheryl.arcibal@scmp.com / https://www.scmp.com/business/article/3084240/coronavirus-hong-kong-singapore-lead-biggest-pullback-asia-pacific?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3084240 | May 19, 2020 1:06 PM SGT
A slump in investment in Hong Kong and Singapore commercial property has contributed to the biggest pullback in a decade across Asia-Pacific, suggesting investors are conserving cash to ride out the coronavirus pandemic.
Investment fell by 50 per cent to US$21.3 billion last quarter from a year earlier, according to Real Capital Analytics, which tracks transactions worth at least US$10 million each. That is the least since the second quarter of 2010, it said.
The drag reflects the underlying pessimism among investors in key Asian markets, as lockdown measures crippled regional economies and threatened a global recession. Recent trends suggest investors are looking for value in South Korea or Japan, in markets relatively insulated from the expensive financial hubs when they rebound.
"Many investors have paused activity due to the uncertain economic environment and, hence, deal activity has been impacted," said Stuart Crow, chief executive of capital markets in Asia-Pacific at JLL. "We see this reduced activity continuing into the second quarter, with trading volumes likely to bounce back more strongly in the second half of the year."
Using a broader yardstick, JLL said investment in commercial properties in the Asia-Pacific region fell by more than a third to US$29.5 billion last quarter. A different measure used by CBRE showed a 25.4 per cent drop to near a three-year low of US$22 billion.
Among six mature property markets in the region, Hong Kong fared the worst, with transaction volumes sliding by 74 per cent, according to JLL. They fell 68 per cent in Singapore and 61 per cent in mainland China.
There were some stand-out transactions in the market, including Hong Kong Land's US$4.4 billion acquisition of a development site in Shanghai, and the US$1.1 billion purchase of LG Twin Towers in Beijing by Singapore sovereign fund GIC.
Nonetheless, the first-quarter slump offers a warning to markets in Europe and the United States, whose economies were belatedly stricken by the pandemic. In the past week, governments from China to India have begun to reopen their economies as the outbreak comes under control.
The slowdown in Hong Kong was exacerbated by the US-China trade war and the anti-government protests last year, according to JLL. Many investors have taken a wait-and-see approach, it added.
Appetite for retail properties waned the most in Asia-Pacific last quarter, as transaction volumes fell by 39 per cent, the property consultants said. Office assets declined 35 per cent while hotel properties slipped 22 per cent.
"The full impact of the Covid-19 outbreak on the investment market will hopefully start to become clearer in the second quarter, as investors focus on existing portfolios and bide their time for the right opportunities," said Regina Lim, executive director of capital markets research in Asia-Pacific at JLL. "Investors we speak to remain calm and optimistic."
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