Singapore's commercial market touted APAC's worst performer in Q3: study

Deal value was 86% lower than last year.

Sales activity for commercial real estate in Singapore contracted the fastest across all major APAC markets in Q3, with the number of deals plunging 74% YoY during the quarter, according to a study by Real Capital Analytics (RCA).

Just over $544m (US$405m) of properties were dealt in the Lion City in the third quarter, a drop of 86% YoY, RCA found.

“Commercial real estate investment has slowed across the board in Singapore this year. Pricing remains elevated, particularly for CBD offices where a couple of deals were struck at record levels on a per square foot basis this year,” said Benjamin Chow, RCA’s senior analyst for Asia Pacific, adding that the industrial sector was the sole bright spot in an otherwise tepid July-September period.

Singapore’s performance echoed the overall trend for the region. Sales of commercial property in APAC shrunk by 38% in Q3, with the global health crisis dampening cross-border deal-making.

Sales across the major income-producing property types dropped to approximately $34.9b (US$26b), down from $44.32b (US$33b) in Q2 and $56.7b (US$42.2b) a year ago.

“The global pandemic continues to hamper deal-making 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.

However, he noted that 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.

Activity in the industrial sector matched Q3 2019 levels. Meanwhile, all other key property types declined, with hotel and retail sales recording the sharpest drop.

On the upside, deals involving individual properties rose compared to Q2 to reach about $30.88b (US$23b), boosted by a smattering of high-value deals, reports RCA.

Sales of development sites, which principally take place in China, also saw its deal volume rise 18% YoY to reach $217b (US$162b) in Q3.

In contrast, portfolio sales plunged to levels last seen during the Global Financial Crisis. For the first 10 months of 2020, deal volume of this type is down 48% compared to the same period a year ago.