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First Half (1H) 2020 preliminary investment volume 45 per cent lower than 1H 2019

Christine Li • 02/07/2020

Some opportunistic buys expected in the second half of 2020 

 

Singapore, 2 July 2020 - The 1H 2020 preliminary investment volume amounted to $6.13 billion, 45 per cent lower than the 1H 2019’s volume of $11.24 billion. The second quarter (2Q) 2020 preliminary investment volume amounted to S$3.06 billion, remaining stable from 1Q 2020’s volume of S$3.07 billion. 2Q 2020 saw the return of big ticket commercial deals, resulting in the quarter’s commercial volume surging to S$2.02 billion, more than 10 times that of S$183.4 million in 1Q 2020. This led to the commercial sector accounting for 66 per cent of 2Q’s total volume.

The largest 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 S$1.68 billion. Also, Perennial divested its 30 per cent stake in TripleOne Somerset to Shun Tak Holdings for S$155.1 million. Another major commercial deal involved Olayan Group purchasing the retail and banking units of 30 Raffles Place (former Chevron House) for S$315.0 million.

A significant chunk of the 2Q 2020 investment sales was attributed to the merger between Frasers Logistics Trust and Frasers Commercial Trust (via Frasers Logistics Trust acquiring Frasers Commercial Trust), which accounted for S$1.25 billion, or around 41 per cent of the 2Q 2020 total volume.

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 prepandemic 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.

Shaun Poh, Executive Director, Capital Markets, Cushman & Wakefield 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.”

2Q 2020 & 1H 2020 Preliminary Investment Volume

 Sector

 2Q Volume

(S$ billions)

 1H 2020 Volume

(S$ billions)

 Residential  0.31  2.33
 Commercial  2.02  2.20
 Industrial  0.70  1.36
 Hospitality  0.00  0.00
 Others/Mixed  0.03  0.24
 TOTAL  3.06  6.13

Source: Cushman & Wakefield Research

The S$1.25 billion comprised of China Square Central (commercial) at a valuation of S$648.0 million and Alexandra Technopark (industrial) at a valuation of S$606.0 million. This led to the 2Q 2020 industrial volume remaining stable at S$701.3 million, as compared to the Q1 volume of S$661.4 million. Without Alexandra Technopark, the industrial volume would have been just S$95.3 million this quarter.

Due to the absence of government land sales (GLS) sites this quarter, activity in the residential sector was muted with a volume of S$305.4 million, significantly down from S$2.02 billion in the preceding quarter.

Christine Li, Head of Research, Singapore and Southeast Asia 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. The full-year volume is expected to be in the range of S$12-$15 billion. If the merger between CapitaLand Commercial Trust and CapitaLand Mall Trust is approved by unit holders, this would add an additional S$10 billion to the investment tally, raising the full-year volume to a range of S$22-25 billion.”


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