Asia Pacific commercial property investment poised to rebound after diving 50% in Q1: RCA

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The COVID-19 pandemic and the resulting economic shock has slammed Asia Pacific commercial real estate investment, with volumes down 50% year-on-year to US$21.3bn in Q1 2020, according to Real Capital Analytics.

There were no real estate investment deals greater than $1.0bn in Asia Pacific during the first quarter, while there were 11 such deals completed in Europe and the US.

RCA said many transactions under contract, which were expected to be completed in the first quarter, had been delayed.

The delays were leading to a bulging pipeline of pending deals, which were US$8bn over average levels for the past two years.

Smaller transactions showed only limited signs of slowing down, particularly in markets that either controlled the spread of the virus in the quarter, such as China and South Korea, or mostly kept a lid on transmission in the first place, like Taiwan.

South Korea led the region in transaction activity in Q1, with investment volumes up 12% YOY to US$4.5bn.

“So far there have only been few indications of deals being terminated, suggesting that investors are adopting a wait-and-see approach rather than entering panic mode,” said David Green-Morgan, RCA’s managing director of analytics for Asia Pacific.

“The wave of the pandemic is further along in Asia Pacific than other regions and most signs suggest that APAC may already be at, or near, the bottom of the investment slump.

“China already started to relax restrictions on its population as early as March and if other countries are able to follow suit, without unleashing a second major outbreak, the economic downturn may be shorter. All eyes are on the few economies within the region that appear to have the virus under control, which may give us the clearest view of the road ahead.”

Unsurprisingly, the industrial real estate sector was the most insulated from the downturn, with industrial property investment volumes in Asia Pacific down just 10% YOY for Q1 2020.

RCA said investors had already been retreating from office and retail properties over the past 12 months, with COVID-19 exacerbating the slide.

This analysis comes from RCA’s latest quarterly Asia Pacific Capital Trends report. Continue reading to see previous quarterly updates.