Commercial property investment volume hits decade-low to $46.93b in 2019

The number of transactions higher than $100m reached only 30% of the five-year average in Q4.

The total volume of commercial property investments crashed 62.9% to $46.93b in 2019, according to a report by Cushman & Wakefield. The yearly figure was low despite the 60.5% surge in Q4 2019’s volumes to $9.53b, which is only 38% of the five-year historical quarterly average of $25.19b.

Likewise, the total number of commercial property investment transactions over $100m hit a decade-low of 41 deals in Q4, amounting to just about 30% of the five-year historical quarterly average.

Local investors remained the most active in the commercial property investment market, but their involvement has cooled off compared to H1. Mainland Chinese investors also remained absent in the market, constrained by capital outflow controls and the devaluation of the Renminbi.

“The previously-active Private Equity Real Estate (PERE) funds continued to adopt a wait-and-see approach as the ongoing social unrest shows no signs of ending,” Cushman & Wakefield’s Hong Kong head of research Reed Hatcher said.

Investments in the retail sector nosedived 41.2% QoQ and 97.3% YoY to $437m, the lowest quarterly level in a decade, as the market recorded decline in both retail sales and tourism arrivals.

The absence of major en-bloc and strata-title office transactions also caused investment into the sector to drop 13.4% QoQ and 65.1% YoY to $1.41b in Q4, marking the lowest quarterly level in five years. Investment volume of properties of over $100m each rebounded 8.3% QoQ and 77.6% YoY to $22.1b.

Meanwhile, three industrial buildings changed hands, contributing to investment volume of $2.13b in Q4 2019. “Attracted by the favorable Industrial Refurbishment Scheme 2.0 that allows redevelopment of old industrial buildings into commercial space with a 20% increase in plot ratio, local investors remained on the look-out for en-bloc industrial assets,” Hatcher said.

Amidst trade tensions and ongoing unrest, Cushman & Wakefield expects the commercial property investment market to further decline in 2020 despite a phase-one trade deal scheduled to be signed in mid-January 2020. However, the Industrial Refurbishment Scheme 2.0 could keep sentiments for industrial properties to be relatively resilient.

“Single-owned en-bloc aged industrial properties, especially those located in Kwun Tong and Kowloon Bay in Kowloon East and Cheung Sha Wan in Tsuen Wan in Kowloon East, should be the most sought-after as investors continue to bank on the ongoing MNC decentraliszation trend into these emerging office districts,” Hatcher added.