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Asia Pacific Commercial Property Sales Drop 38% In Q3

Asia Pacific Commercial Property Sales Drop 38% In Q3

South Korea showed resilience, Singapore’s contraction was sharpest in Asia Pacific

November 11, 2020 – Commercial property sales in the Asia Pacific region recorded a 38% year-on-year drop in the third quarter of the year as the global pandemic continued to dampen investor sentiment across the region, the latest Asia Pacific Capital Trends report from Real Capital Analytics (RCA) showed.

Total sales across commercial property types reached US$26 billion in the months of July to September this year, compared to the US$42.2 billion seen in the third quarter of 2019. The third-quarter 2020 volume was also a fall from the US$33 billion seen in the April to June period of this year.

“The global pandemic continues to hamper dealmaking for a swathe of cross-border investors, and the clouded economic outlook in many markets still presents uncertainty that puts many investors on hold,” said David Green-Morgan, RCA’s Managing Director for Asia Pacific.

“Domestic players seem to hold the advantage at the moment, and the major markets with robust domestic investor bases – such as South Korea, Japan and China – are holding up better in the current environment.”

Industrial continues to perform well

source: RCA

In sectoral terms, the RCA report said the industrial sector fared the best and matched the levels of sales activity of a year ago. However, all other key property types declined, with hotel and retail sales showing the sharpest drop.

For the first three quarters of 2020, sales of warehouses and tech-focused assets reached US$19.9 billion, gaining 15% from the levels seen a year ago. RCA said much of the interest is focused on logistics properties and data centers.

The retail sector was the worst hit. January to September figures showed that sales transactions of retail commercial properties declined by 53% to US$13.7 billion. 

South Korea outperforms, Singapore lags

source: RCA

The RCA study also showed that South Korea’s commercial property sales transactions managed to grow by 22%, strongly bucking the Asia Pacific’s average decline of 38%. 

“The outlook for South Korea is looking brighter than some other major economies, with a bulging deal pipeline indicating that the third quarter won’t be just a one-off positive story. Major investors have curtailed their spending overseas, which had been ratcheting higher prior to the pandemic,” Morgan said. 

A record US$5 billion of offices were traded in a single quarter in South Korea. At the end of September, there were US$9.3 billion of pending deals in the pipeline – more than the total of completed deals in the fourth quarter of 2019.

Meanwhile, sales activity in Singapore contracted at the fastest rate of all the major Asia Pacific markets during the period with only US$405 million worth of transactions in the third quarter. 

Singapore is also the worst performing commercial property market in the first nine months of the year with a 74% decline in sales transactions. 

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