Commercial property transactions fell below US$5b mark in H1

Singapore trailed its Asian peers in terms of the number of transactions.

Commercial real estate transaction volumes in Singapore fell below the $6.94b (US$5b) mark in the first half of the year, trailing behind most of its Asian peers, according to the Real Estate Summary report of UBS Management.

China saw the highest surge in commercial property transactions at around $18.06b (US$13b) in the first six months of the year, followed by Japan at around $15.28b (US$11b) and Australia at around $14b (US$10b). Commercial property transaction volumes in Hong Kong and South Korea hit around $13.89b (US$10b) and $12.5b (US$9b) respectively.

Overall, the Asia-Pacific region saw its commercial property transaction volumes fall 18% YoY in H1, led by declines from Japan and Hong Kong.

Also read: APAC real estate transactions hit record-high US$86b in H1

Singapore, on the other hand, is described to have performed “comparatively well” over the same period as its transaction volumes reversed the dip seen in H1 2018. However, the report noted that “chunky nature” of the investment activity masks the fact that the number of transactions was actually not high.

Also read: Singapore defies real estate investment decline as Q2 transactions hit $4.02b

In addition, cross-border capital and funds continue to be keen in the Singapore commercial real estate space.

“After the sale of Chevron House to AEW Capital in March 2019, Frasers Tower was reportedly sold to Korea's NPS for more than $1.9b. At a quoted yield of 2.8% (according to RCA), this is most reflective of the situation in the Singapore capital markets – strong inflows chasing limited core assets,” UBS Asset Management stated.

In the retail property segment, leasing activity in both Singapore and Hong Kong softened in Q2 2019. Prime retail rents were still resilient due to low vacancy rates and continued demand for prime space. Similarly in Tokyo, the prime Ginza area has a vacancy rate of less than 5%, and with tourism inflows hovering around record high levels, there was support for rents, which were stable in the same period. 

Similarly, the vacancy rate of office spaces continued to tighten to 4.8% in Singapore. This is blamed on increased caution amongst occupiers as some banks are reportedly right-sizing.