Non-residential property transactions nearly halved in H1 over weak investor sentiment

There were only 475 commercial transactions from January-April 2019.

Investment sentiment remained subdued in the first half of the year and will continue for the next three to six months, according to a report by Savills.

The recent social unrest and economic uncertainties reportedly drove investors to remain at the sidelines and “wait out the turbulence.”

Non-residential transactions declined by 49% in the first half of 2019, the worst start since 2016; whilst major non-residential transactions (over $100m) fell by 50% YoY in the first five months of the year.

Office transactions fell by 43% YoY in the first four months of the year, with total transactions down to 323 from 569 in 2018 over the same period. Landlords shrugged off discount requests from investors and stood firm in their asking prices, leading to fewer deals entertained only by end users determined to find their own space regardless of market conditions.

Flatted factories were hit the hardest, with only 927 deals in the first four months of 2019 compared to 2,047 transactions during the same period last year, a 55% YoY decline.

Meanwhile, commercial investments fell by 36% YoY, with only 475 transactions from January to April 2019 from 742 deals over the same period last year.

Investing further dampened due to the decline in retail sales, particularly in key shopping items for tourists such as jewellery (down 4.4%) and electric goods (down 16.6%), which Savills reported led some veteran investors to decide to wait out the turbulence.

The report also noted that capital outflows measured by the rising HIBOR (1.66% in March to 1.99% by May) and the declining aggregate balance ($64.8b in March to $54.3b by May) will also put the investment market on a bumpy track for Q3 and even until Q4.