Singapore property investment sales fall 45% in first half of 2020: Report

Big-ticket commercial deals like that of AXA Tower helped prop up second-quarter investment sales.
Big-ticket commercial deals like that of AXA Tower helped prop up second-quarter investment sales.ST PHOTO: JOEL CHAN

SINGAPORE - Property investment sales in Singapore slumped in the first half of this year amid the coronavirus pandemic, though the market showed signs of stabilising in the second quarter, a report from Cushman & Wakefield on Thursday (July 2) showed.

Investment sales for January to June fell 45 per cent to $6.13 billion from $11.24 billion in the year-ago period, according to preliminary data compiled by the real estate consultancy.

After shrinking by more than a third quarter on quarter to $3.07 billion in the first three months of 2020, investment volume remained stable in the second quarter with total sales of $3.06 billion.

"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," said Christine Li, Cushman & Wakefield's head of research for Singapore and South-east Asia.

Ms Li expects investment sales for full-year 2020 to be in the range of $12 billion to $15 billion. However, if the merger between CapitaLand Commercial Trust and CapitaLand Mall Trust is approved by unitholders, it would raise the full-year tally by $10 billion to $22-25 billion, she added. This compares to 2019's $32.87 billion.

Propping up the investment market in the second quarter was the return of big-ticket commercial deals, with deals surging to $2.02 billion, more than 10 times that of $183.4 million in first quarter, said Cushman & Wakefield. This led to the commercial sector accounting for 66 per cent of total investment sales

The biggest deal of the quarter was Chinese e-commerce giant Alibaba Group buying a 50 per cent stake in AXA Tower in a deal that values the property at $1.68 billion. Also, Perennial divested its 30 per cent stake in TripleOne Somerset to Shun Tak Holdings for $155.1 million. Another major commercial deal involved Olayan Group purchasing the retail and banking units of 30 Raffles Place (former Chevron House) for $315 million.

A big chunk of the the quarter's investment sales came from the merger between Frasers Logistics Trust and Frasers Commercial Trust, accounting for $1.25 billion, or around 41 per cent of the total sale volume. The $1.25 billion comprised of China Square Central (commercial) at a deal value of $648.0 million and Alexandra Technopark (industrial) at a valuation of $606.0 million. This led to second-quarter industrial sales amounting to $701.3 million, slightly more than the first quarter's $661.4 million. Without Alexandra Technopark, second-quarter industrial sales would have shrunk to $95.3 million.

Due to the absence of government land sales sites closing in the second quarter, residential sales plunged 85 per cent to $305.4 million, from $2.02 billion in the first quarter.

The hospitality sector saw no deals, as buyers waited on the sidelines for prices to be revised further downwards. With uncertainty over how long the Covid-19 crisis will drag on and when tourism will return to pre-pandemic levels, a significant number 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, said Cushman & Wakefield.

Shaun Poh, its executive director for capital markets, said: "In this post-circuit breaker period with the resulting recession, some owners are expected to put up their assets for sale to free up liquidity. Funds with a fixed fund life will also 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."