Commercial property investment plummets across Asia Pacific

Investment in Asia-Pacific commercial real estate fell 26 percent in the first quarter of 2020 as a result of the COVID-19 outbreak, according to research released by international property adviser JLL.

Real estate transaction volumes dropped to US$34 billion during the three-month period ending March, with the Chinese mainland, Hong Kong and Singapore suffering the biggest contractions.

"The Q1 decline was widely expected as many investors have paused activity due to the uncertain economic environment," said Stuart Crow, CEO of capital markets, JLL Asia Pacific. "Reduced activity would continue into Q2, with trading volumes likely to bounce back more strongly in the second half of this year."

Across the region, the Chinese mainland, Hong Kong and Singapore, where investment activity plunged by at least 60 percent year on year, were the most adversely affected markets. South Korea and Japan, however, felt the least impact, finishing at either similar or slightly higher levels compared with same period a year ago, JLL data showed.

While the coronavirus pandemic reverberates across industries and asset classes, retail and office investment, among others, seemed to feel the hardest blows, with transaction volume dropping 39 percent and 36 percent, respectively, from same period a year ago. Hotel transaction, partially aided by select deals finalized in the earlier part of the quarter in Japan and South Korea, registered a rather moderate 22 percent retreat.

Bucking the trend, the region's industrial and logistics investment market was the most resilient, with activity growing 9 percent year on year.

On the Chinese mainland market in particular, investment activity dived 62 percent year on year as many investors delayed deployment while sellers deferred their initial plans to sell. Notably, domestic companies digested the bulk of major office deals, especially in Shanghai, for owner occupation, JLL research found.

An earlier forecast by property services provider Colliers International also echoed that logistics facilities, together with business parks and data centers, are highly recommended options for major real estate investors this year mainly due to resilient market demand compared with other asset classes.