Published August 19, 2008

Atrium, Crosby sales among top 5 Asia-Pac deals in Q2

But DTZ says S'pore commercial property sales in Q2 fell 24% from Q1


INVESTMENT sales of property in Singapore slowed in the second quarter of this year, but the sales of The Atrium @ Orchard (US$617 million) and 71 Robinson Road (on the former Crosby House site) for US$547 million made it to the list of top five commercial real estate deals in the Asia-Pacific region in the second quarter of 2008, according to DTZ Research's Q2 2008 Asia Pacific Investment Brief.

No 4 ranking: The Atrium @ Orchard's US$617 million price tag was dwarfed by Tokyo's Resona Maruha Building, Shinsei Bank Building and Shanghai's The Centre

Total transaction value of commercial real estate across Asia-Pacific was about US$19.6 billion in Q2, a decrease of over US$2 billion or 10 per cent from Q1 2008 and down a bigger 43 per cent or almost US$15 billion from the peak in Q3 last year, DTZ's numbers showed.

With the global economic outlook remaining uncertain, transactional activity in the region is expected to stay subdued. However, with many international investors looking to Asia as the engine of growth over the next 18-24 months while the US and European economies slow, this should ensure that capital continues to flow into the region to supplement the already-high levels of liquidity and equity that exist in many markets in Asia-Pacific, the property consulting group said.

'Those economies that are the most open and have the greatest exposure to markets in the US and Europe are likely to be most affected,' DTZ said.

Transaction values in the four largest markets of Tokyo, Singapore, Hong Kong and Australia have dropped markedly over the last three quarters from a peak of over US$27 billion in Q3 last year to just under US$15 billion in Q2 2008.

For the Asia-Pacific region as a whole, DTZ noted that despite declines in transaction values, activity is still well above the long-term average for the region. It is expected to remain so through this year as investors remain committed to increasing their exposure to Asia-Pacific,' the report said.

As the global economic outlook remains uncertain, DTZ expects transactional activity to remain subdued. 'However, we are unlikely to see the significant decline in activity or values that have been seen in other markets around the world, most particularly in the US and UK, although there could be isolated incidents within Asia-Pacific,' DTZ added.

The US$1.5 billion sale of Resona Maruha Building in Tokyo was the biggest transaction in the Asia-Pacific in Q2 2008, followed by the US$1.1 billion sale of Shinsei Bank Building (BR), also in Tokyo. In third position was the deal for The Centre in Shanghai (US$639 million), followed by The Atrium @ Orchard and 71 Robinson Road in Singapore.

DTZ's numbers on commercial real estate cover office, retail, industrial, mixed-use, healthcare, educational property and infrastructure such as carparks.

For Singapore, the value of such real estate transactions fell 24 per cent from $5.9 billion in Q1 2008 to $4.5 billion in Q2.

CB Richard Ellis executive director Jeremy Lake said that investment sale deals in the Singapore commercial property sector (office and retail) for the second half of this year will likely be less than the level achieved in the first-half.

'Even though there are quite a number of property funds and institutional investors with money to spend, the volume of deals is slowing down,' he said. 'In the retail property sector, traditionally the deal flow has been poor as there have been few sellers. In the office sector, there are some sellers, but there's often a price gap of 10-20 per cent between buyers and sellers.'

Buyers of Singapore office blocks have been adopting a more cautious stance more recently due to a combination of concerns over an increase in supply as major office developments are completed from 2010 onwards and an element of uncertainty over whether companies will continue to expand at the same pace, Mr Lake added.