Commercial property deals plunge

Commercial Property Deals Plunge Nearly 40% In Asia Pacific

HONG KONG – Real estate experts believe that the region’s commercial real estate market is unlikely to see a robust recovery anytime soon, reported The South China Morning Post (SCMP) on Tuesday (6 October).

The virus outbreak has dealt a heavy blow to Asia Pacific’s commercial property sector, with overall deal value plunging by almost 40 percent during the 12 months to September, while transaction numbers slumped by nearly 33 percent, data from Real Capital Analytics show.

Desmond Sim, CBRE’s Research Head for Singapore and Southeast Asia, said everyone has adopted a cautious stance, particularly property investors.

“We have to say that no (market) is fully back to normal from COVID-19, as GDP was impacted and the way we work has changed. Certain markets in Asia have been affected gravely, including hospitality, retail, and office.”

In fact, CBRE’s figures revealed that commercial property investment volume in Asia Pacific plummeted by 48 percent to US$17 billion in Q2 2020 on an annual basis after a 51 percent freefall during the first quarter.

The real estate consultancy attributed the sharp decline to lockdown measures and travel restrictions, both of which impeded cross-border transactions.

Market watchers noted that property investors have especially shunned retail assets in countries with prolonged lockdowns and resurgent COVID-19 cases.

“As (REITs), we are always looking for new assets. But we all see that the market has been very quiet, which is mainly due to low rental yields and rising vacancy,” said Justina Chiu, CEO of Fortune REIT, which operates 16 shopping centres in Hong Kong.

Due to the absence of tourists, retail sales in Hong Kong have fallen for 18 straight months, based on government data. Retail sales only reached HK$187 billion (US$24 billion) during the 12 months to July. This translates to HK$26.7 billion per month versus an average of HK$36 billion a month in the previous year.

“Tenants’ income was gravely affected by COVID-19 and as a result the portion of rents calculated on a tenant’s retail sales dropped sharply,” said Credit Suisse real estate analyst Chen Jianping.

“Meanwhile, the basic rent, the fixed part, dipped 24 percent below the average rent in 2018. As a whole, it has affected landlords’ income for the next one to two years.”

Nonetheless, there was better activity in September compared to August, with mainland China, Hong Kong, Japan, Singapore and the rest of the ASEAN region all witnessing higher site visits and more inquiries from would-be tenants.

“It is very unlikely a full recovery will happen soon as right now most of the markets are still locked by travel restrictions, and consumption is still pretty local, with (people purchasing only) necessity goods. We really need to wait until travel restrictions are lifted,” added Chiu.

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