Property deals crashed 45% to $6.13b in H1 2020

Despite the surge in big commercial deals, the lack of hospitality deals dragged overall volume.

Property investment volume slumped 45% YoY to $6.13b in the first half of 2020, according to data from Cushman & Wakefield. In Q2, deal volume held steady at $3.06b boosted by big ticket commercial deals.

Commercial volume surged more than tenfold to $2.02b, from $183.4m in Q1, leading to the sector accounting for 66% of Q2’s total volume. The largest deal of the quarter was Chinese e-commerce giant Alibaba Group buying a 50% stake in AXA Tower for $1.68b.

A significant chunk of the Q2 investment sales was also attributed to the merger between Frasers Logistics Trust and Frasers Commercial Trust, which accounted for $1.25b, or around 41% of the total commercial volume.

On the other hand, the hospitality sector remained quiet with no deals, as buyers waited on the side-lines for prices to be revised further downwards.

“As there is uncertainty over the duration of the crisis and when tourism will return to the pre-pandemic levels, a significant proportion of hospitality asset owners could be seeking to exit the sector in favour of more stable asset classes, which could lead to some deals in future quarters,” Cushman & Wakefield explained.

Cushman & Wakefield’s executive director for capital markets Shaun Poh explained that some owners are expected to sell their assets to free up liquidity, and funds with a fixed fund life will be planning their exits.

“As past recessions have shown, there are gains to be reaped when investors enter during the period when the market is going through a repricing to find its balance. We are starting to see some market activity around investors sniffing out these opportunities and these might potentially be inked in the later part of the year,” Poh said.

In the industrial property sector, investment volume remained relatively stable at $701.3m in Q2 compared to the Q1 volume, single-handedly boosted by the $1.25b from Alexandra Technopark. Otherwise, volume would have just hit $95.3m.

Meanwhile, due to the absence of government land sales (GLS) sites, activity in the residential sector was muted, with investment volume dropping to $305.4m, compared to the $2.02b in the preceding quarter.

The full-year volume is projected to hit around $12-15b, but could reach up to $22-25b if the merger between CapitaLand Commercial Trust and CapitaLand Mall Trust is approved by unitholders, Cushman & Wakefield’s head of research in Singapore and Southeast Asia, Christine Li, said.

“In the absence of a catalyst, the sluggish market sentiment is expected to continue, with volume in the second half of the year unlikely to increase significantly,” Li said.