Turnover at $3.02b as investor sentiment is hit; residential sector dominates transactions

Property investment sales here plunged in the first quarter as the coronavirus outbreak took its toll on investor sentiment, a report noted yesterday.

Turnover came in at $3.02 billion, down 37 per cent from the final three months of last year, Cushman & Wakefield reported.

Ms Christine Li, its head of research for Singapore and South-east Asia, said: "Big-ticket commercial transactions were absent, a direct result of the Covid-19 pandemic and the rapid sell-off in stock markets across the globe.

"Sellers were unwilling to lower prices significantly, hoping that the impact on the economy would be temporary and that market confidence would recover rapidly after the pandemic was contained.

"Meanwhile, buyers were waiting... to enter at more attractive prices as it is appearing increasingly likely that the reduction in economic activity from lockdowns will trigger a global recession."

First-quarter investment sales, defined as transactions of $10 million and above, were dominated by the residential sector at $2.02 billion, double the previous quarter's volume. This mainly came from the award of previously bid government land sale sites.

Commercial property transactions in the three months to March 31 plunged 81 per cent to $183.4 million from the previous quarter, while hospitality - which covers hotels, serviced apartments and co-living space - clocked no deals as escalating travel bans and lockdowns soured investor appetite.

The industrial sector was not spared but the effect was smaller. Sales here fell 22 per cent to $606.8 million.

Cushman & Wakefield pointed to several major strata deals. In the quarter's largest office transaction, a wealthy South Korean acquired the 11th floor of Samsung Hub from Sun Venture for $49.8 million.

Another notable strata deal was Hong Realty's divestment of the 10th floor in Suntec Tower One to the Rosa family for $37.1 million - a 26 per cent gain from Hong Realty's purchase at $29.5 million in 2018.

The report also noted that Ascendas Reit remained active during the quarter. It bought a 25 per cent stake in Galaxis for $102.9 million.

The balance stake of Galaxis is held by sponsor CapitaLand so there could be an injection of the remaining 75 per cent into the real estate investment trust (Reit) in subsequent quarters, said Cushman & Wakefield.

Ascendas Reit also sold Wisma Gulab to Heap Seng Group for $88 million and 25 Changi South Street 1 to Hao Mart for $20.3 million, as part of its strategy to recycle capital into better performing assets.

Cushman & Wakefield expects the "muted tone" in the investment market to continue into this quarter due to the lockdown on non-essential services until May 4 - and possibly beyond.

It forecasts that investment volumes for the whole year could more than halve to $10 billion-$15 billion, from $32.87 billion last year, as buyers remain on the sidelines.

But it added: "On a more optimistic note, the decline in interest rates could lead to a rapid return of investment activity in 2021 once investor sentiment recovers after the pandemic is contained."

Mr Shaun Poh, Cushman & Wakefield's executive director and head of capital markets, Singapore, noted: "We are probably going to see more bite-size investment deals in the second quarter and into the second half of 2020.

"Fundamentally, there is still appetite, particularly for office, hotel and logistics assets."

He said the firm has not seen any distressed assets at the moment. He credited this to the various government stimulus packages to help the hospitality and retail-related industries, and the sound financial position of most asset owners.

"Launch activity might resume after the circuit breaker measures are lifted as investors begin to have a better grasp of the market situation and are in a better position to calculate their sums," said Mr Poh.

Source: Straits Times, 14 April 2020