Buzz building as investment sales pick up in commercial property in Q3

The buzz may be returning in Singapore’s real estate investment sales market, with interest and activity recovering in the commercial sector, in particular during the July to September quarter.

Yet investment sales – defined as transactions totalling $10 million and more – were still down 55.1 per cent year on year in the third quarter at about $4.4 billion, according to Knight Frank yesterday.

It also noted that there were no transactions completed in the public sector during the three months as no sites were sold under the government land sales programme.

Significant commercial deals were “prevalent” as the economy began to reopen after Covid-19 pandemic-related restrictions.

Such deals were led by the sale of a half stake in Frasers Property’s Northpoint City (South Wing) to TCC Group for $550 million and the sale of Robinson Point by Tuan Sing Holdings for $500 million.

“There remains substantial interest for commercial properties, especially in the central business district (CBD) with the potential of existing buildings tapping into the CBD Incentive Scheme,” the research team wrote.

However, there is limited saleable stock available for such properties, it added.

Foreign investors are still keen on expanding their operations from Singapore.

“The likes of Alibaba acquiring a 50 per cent stake in AXA Tower earlier in May and ByteDance looking to set up in Singapore are just the beginning of the potential demand coming from China-based technology companies,” Knight Frank said.

In the year ahead, technology firms are likely to show increasing interest in acquiring commercial properties for regional bases, it noted.

Meanwhile, demand in the residential sector was found to be “particularly resilient” in the Good Class Bungalow (GCB) segment.

A string of deals totalled some $128.3 million during the third quarter – coming close to the $166.4 million recorded in the first half of this year. This demonstrated “a strong recovery in demand”, said Knight Frank.

The Knight Frank research team said that despite the Covid-19 outbreak, Singapore remains an attractive destination for foreign investors, owing to its comparatively stable economic and political environment, which is not as exposed as other gateway cities to geopolitical uncertainties.

Key transactions in the past three months included the sale of GCBs in Garlick Avenue.

The family of Singaporean billionaire Goh Cheng Liang was said to be the buyer of an old bungalow sitting on 101,550 sq ft of freehold land with the price understood to be about $93 million.

But even as trading in Singapore’s ultra-luxe homes has continued amid the pandemic, hitting the 2019 volume may be unlikely as buyers are now more selective, ERA Realty’s head of the GCB division, Mr Henry Lim, said recently.

Investment sales of industrial properties grew to $406.6 million in the third quarter amid improved sentiment.

A warehouse was sold to AIMS Apac Reit for $129.6 million, while a business park development at 26A Ayer Rajah Crescent by Mapletree Industrial Trust was bought by Equinix Singapore for $125 million.

But overall investment sales by Singapore-based entities overseas were lacklustre during the quarter.

Outbound investment sales from investors here shrank 24.3 per cent, from $3.7 billion in the third quarter last year to $2.8 billion, based on Real Capital Analytics.

Major outbound deals included the acquisition of a low-density prime residential development site in Shanghai by a joint venture between Yanlord Land Group and Huafa Industrial for 4.5 billion yuan (S$909 million), Knight Frank said.

Keppel Reit also bought freehold Grade A commercial property Pinnacle Office Park in Sydney for A$306 million (S$298 million), its manager announced last month.

The Knight Frank research team said that despite the Covid-19 outbreak, Singapore remains an attractive destination for foreign investors, owing to its comparatively stable economic and political environment, which is not as exposed as other gateway cities to geopolitical uncertainties.

It expects demand for investment properties in Singapore to increase in the coming months, as investors are keen to continue leveraging available opportunities and low interest rates.

Ms Christine Li, Cushman & Wakefield’s head of business development services for Singapore and South-east Asia, noted in August that real estate was being offered to investors at lower prices.

Opportunities in the investment sales market could thus emerge with 10 per cent to 20 per cent discounts from pre-Covid levels a couple of quarters down the road, Ms Li said then.

THE BUSINESS TIMES

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