Property investment sales slumped in the first half of the year amid the pandemic, although the market showed signs of stabilising in the second quarter, a report out yesterday showed.
Investment sales for the six months to Tuesday hit $6.13 billion, a fall of 45 per cent from $11.24 billion in the same period a year earlier, according to preliminary data compiled by Cushman & Wakefield.
Investment came in at $3.07 billion for the first three months of this year - down more than a third from the last quarter last year - but volumes stayed 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 Ms Christine Li, Cushman & Wakefield's head of research for Singapore and South-east Asia.
Ms Li expects investment sales for this year to be in the range of $12 billion to $15 billion. However, if unit holders back the merger between CapitaLand Commercial Trust and CapitaLand Mall Trust, it would raise the full-year tally by $10 billion to between $22 billion and $25 billion, she added. This compares with $32.87 billion last year.
The investment market in the second quarter was propped up by the return of big-ticket commercial deals, with transactions surging to $2.02 billion, more than 10 times higher than the $183.4 million recorded in first quarter, said Cushman & Wakefield. The commercial sector accounted for 66 per cent of total investment sales.
The quarter's biggest deal was Chinese e-commerce giant Alibaba Group buying a 50 per cent stake in AXA Tower, a sale that values the property at $1.68 billion.
And Perennial divested its 30 per cent stake in TripleOne Somerset to Shun Tak Holdings for $155.1 million, while Olayan Group bought the retail and banking units of 30 Raffles Place - the former Chevron House - for $315 million.
A big chunk of the quarter's investment sales came from the merger of 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 China Square Central (commercial) at a deal value of $648 million and Alexandra Technopark (industrial) at a valuation of $606 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, industrial sales would have shrunk to $95.3 million.
The absence of government land sales sites closing in the second quarter meant residential sales plunged 85 per cent to $305.4 million from $2.02 billion in the first three months.
The hospitality sector saw no deals, as buyers waited on the sidelines for prices to be revised further downwards.
Uncertainty over how long the Covid-19 crisis will drag on and when tourism will return to pre-pandemic levels may have left a significant number of hospitality asset owners looking to exit the sector, which could lead to some deals in future quarters, said Cushman & Wakefield.
Mr Shaun Poh, its executive director for capital markets, added: "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."
