M A R K E T B E AT Investment Q2 2020

12-Mo. Forecast Singapore’s Economy Impacted by Pandemic Singapore’s GDP growth turned negative at -0.7% yoy in Q1 2020 as the economy was impacted by the pandemic. Economic growth in Q2 2020 is $6.22B expected to remain weak due to the imposition of the circuit breaker, which also impeded the closing of deals. The government expects the country YTD Investment Volume (SGD) to enter its deepest recession ever, with full-year GDP growth in the range of -7.0 to -4.0%

$2,845 Return of Big Ticket Commercial Deals Office Capital Value (SGD/sf) The Q2 2020 investment volume amounted to $3.15 billion, remaining stable from Q1 2020’s volume of $3.07 billion. Q2 2020 marked the return of big ticket commercial deals, resulting in the quarter’s commercial volume surging to $2.02 billion, 11 times that of $183.4 million in Q1 2020. This 3.20% led to the commercial sector accounting for 64% of Q2 2020’s total volume. Office Net Yield The largest deal of the quarter was Alibaba Group’s acquisition of a half stake in AXA Tower from a Perennial-led consortium at an agreed property value of $1.68 billion. Alibaba and the Perennial-led consortium intend to form a joint venture and redevelop the property, likely into a mixed-use development, which will enable them to unlock additional GFA from the CBD Incentive Scheme. It is expected that Alibaba will occupy a significant portion of the office component upon completion as its regional headquarters in Southeast Asia for the parent group and its subsidiaries such as Lazada.

Also, Perennial Real Estate divested its 30% stake in TripleOne Somerset to Shun Tak Holdings for $155.1 million. With Shun Tak already owning the other 70% from a prior transaction with Perennial, this move will grant it full control of the property and allow it to better re-position the asset to ECONOMIC INDICATORS tackle the headwinds emanating from the current downturn. Q1 2020

12-Mo. Another major commercial deal involved Saudi-based Olayan Group purchasing the retail and banking units of 30 from Oxley Forecast Holdings for $315.0 million. The 27 office floors of the property, formerly known as , had earlier been sold to AEW after Oxley -0.7% embarked on an extensive $100 million asset enhancement initiative. GDP Growth

0.4% CPI Growth INVESTMENT SALES VOLUME INVESTMENT SALES VOLUME BY SECTOR

$40 2.4% $20 $30 Unemployment Rate $15

$20 $10

Billions Billions 0.9% $10 $5 10-Yr Government Bond Yield $0 $0 2016 2017 2018 2019 YTD 2020 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Source: MTI, MAS, Oxford Economics Residential Commercial Industrial Hospitality Mixed/Others M A R K E T B E AT SINGAPORE Investment Q2 2020

GRADE A CBD OFFICE CAPITAL VALUE REIT Merger Bolsters Investment Volume A significant chunk of the Q2 2020 investment volume was attributed to the merger between Frasers Logistics Trust and Frasers $3,500 Commercial Trust (via Frasers Logistics Trust acquiring Frasers Commercial Trust), which accounted for $1.25 billion, or around 40% of the Q2 2020 total volume. $3,000 The $1.25 billion comprised of China Square Central (commercial) at a valuation of $648.0 million and Alexandra Technopark $2,500 (industrial) at a valuation of $606.0 million. This led to the Q2 industrial volume remaining stable at $731.3 million, as compared to $/sf the Q1 volume of $661.4 million. Without the inclusion of Alexandra Technopark, the industrial volume would have been just $2,000 $125.3 million this quarter.

$1,500 Residential Sector Muted Due to Absence of GLS Sites Due to the absence of government land sales (GLS) sites this quarter, the residential sector was muted with a volume of $320.4 million, significantly down from $2.02 billion in the preceding quarter. Price declines in the residential sector are expected to be mild due to the ability of homeowners to defer mortgage payments, resulting in sellers having strong holding power. GRADE A CBD OFFICE NET YIELD Hospitality Sector Remains Quiet as Buyers Wait on Sidelines 4.0% The hospitality sector also remained quiet with no deal, as buyers waited on the sidelines for prices to moderate further. As there is uncertainty over the duration of the crisis and when tourism will return to close to the pre-pandemic levels, a significant proportion of hospitality asset owners could be seeking to exit the sector in favour of more stable asset classes. Others may also put their assets up 3.5%

for sale to free up liquidity during the post-circuit breaker period, as operating the hospitality asset could pose some cashflow % challenges. As such, the pricing gap between buyers and sellers is likely to narrow, which could lead to some deals in future quarters. 3.0%

2.5%

Outlook

• The H1 2020 investment volume amounted to $6.22 billion, 45% lower than the H1 2019’s volume of $11.24 billion.

• In the absence of a catalyst, the sluggish market sentiment is expected to continue, with volume in the second half of the year unlikely to increase significantly.

• As such, the full-year volume is expected to be in the range of $12-15 billion. • Nevertheless, if the pending merger between CapitaLand Commercial Trust and CapitaLand Mall Trust is approved by unitholders, this would add an additional $10 billion to the investment tally, bringing the range to $22-25 billion. M A R K E T B E AT SINGAPORE Investment Q2 2020

INVESTMENT ACTIVITY

PROPERTY TYPE PUBLIC VOLUME (SGD MILLIONS) PRIVATE VOLUME (SGD MILLIONS) TOTAL VOLUME (SGD MILLIONS) Q-O-Q CHANGE (%)

Residential $0.0 $320.4 $320.4 -84%

Commercial $0.0 $2,015.0 $2,015.0 999%

Industrial $4.0 $727.3 $731.3 11%

Hospitality $0.0 $0.0 $0.0 -

Mixed/Others $33.8 $50.0 $83.8 -60%

TOTAL $37.8 $3,112.7 $3,150.5 3%

Note: Figures may not tally precisely due to rounding

SIGNIFICANT SALES

PROPERTY NAME TYPE BUYER SELLER PURCHASE PRICE SUBMARKET

AXA Tower (50% stake) Office Alibaba Group Perennial-led Consortium $840,000,000 / Tanjong Pagar

China Square Central Office Frasers Logistics Trust Frasers Commercial Trust $648,000,000 Raffles Place

TripleOne Somerset (30% stake) Office Shun Tak Holdings Perennial Real Estate $155,100,000 Orchard

30 Raffles Place (Retail & Banking Units) Office & Retail Olayan Group Oxley Holdings $315,000,000 Raffles Place

Alexandra Technopark Industrial Frasers Logistics Trust Frasers Commercial Trust $606,000,000 Harbourfront / Alexandra

Sources: Real Capital Analytics, Cushman & Wakefield Research Significant transactions over $10 million

CHRISTINE LI SHAUN POH Head of Research Executive Director Business Development Services Capital Markets Singapore & Southeast Asia Singapore +65 6232 0815 / [email protected] +65 6232 0882 / [email protected]

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