Hanoi(VNA) - Asia Pacific’s commercial real estate market has felt the bruntof COVID-19 so far this year, with a sharp decline in investment volumes andrental prices across most major commercial asset classes, according to real estate services firm JLL.

Regional investment volumes in the first six months of this year have fallen 32 percentfrom a year earlier, JLL says. The preliminary datashowed second quarter investment activity 39 percent lower year-on-year,following a 26 percent drop in the first quarter.

The slowdown came amid lockdowns and travel restrictionsthat inhibited investors’ short-term capital deployment plans.

“The sharp decline in deal activity reflects the lack ofwilling sellers and the general uncertainty that exists around market recovery,”says Stuart Crow, CEO of JLL’s Capital Markets Asia Pacific. “Liquidity remains very high, and we expecttransaction activity is poised to rebound in the second half as economiesfurther reopen and pricing expectations are adjusted in certain markets.”

The pandemicwas keeping investors on the side lines as to whether to invest or expandbusinesses in Vietnam. Total foreign investment amounted nearly 15.7 billionUSD in the first half of the year, down 15.1 percent year-on-year.

In Ho Chi MinhCity, Grade A & B market started to feel the heat with net absorptionfalling into negative territory for the first time in a decade, registeringminus 3,619 sqm in 2020. This was mainly due to small and medium enterprises,who were major sources of tenants in Grade B market, scaling down and earlyterminating the contracts as a result of the COVID-19 impacts. Grade A sector, backedup by deep-pocketed companies, was also under pressure. This was proven by thehalting demand from expansion and new set-up during the outbreak.

However, the market has not recordedmuch rent adjustment last quarter as landlords seemed to stay confident with the current tight market andlimited future supply.

Retail rents werethe most severely impacted by lockdowns, mobility restrictions, andstrict social distancing. Vacancyrate in HCM City’s shoppingmalls increased to 30 percent in the second quarter of 2020. The “socialdistancing” measures during the first three weeks of April led to the temporaryclose down of all the malls in the southern city. After the measures were lifted, most of the mallsstarted to re-operate, but with more vacant space, as weak leasing demand continued.

The rental remained unchanged quarter-on-quarter during the period, staying at 79.4 USD per sqm per month in the central business district (CBD) and 38.5 USD per sqmper month in the non-CBD area. Some landlords maintained their rentalconcessions such as rent discount or rent deferment till end-May. Rentalpolicies in almost malls were getting back to normal in June.

There is still significant uncertainty about growth and theshape of recovery amid the COVID-19, says Roddy Allan, JLL’s Chief Research Officer Asia Pacific, indicating that investors will approach the market inthe second half with measured optimism, which will accelerate further in early2021./.