The buzz may be returning to Singapore’s real estate investment sales market, with interest and activity recovering in the commercial sector in particular during the July-September quarter, compared with preceding quarters.
That being said, overall, investment sales – defined as transactions totalling S$10 million and more – in the city-state was still down 55.1 per cent year on year to about S$4.4 billion.
This is according to Knight Frank’s Q3 market report published on Friday, which 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.
Commercial investment sales jumped by 96.4 per cent quarter on quarter to some S$3.3 billion.
Significant commercial deals were “prevalent” in Q3 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) valued at S$550 million to TCC Group and the sale of Robinson Point by Tuan Sing Holdings for S$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 on the market for such properties, it added.
This is also considering that 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 and occupying commercial properties in the city-state to set up their regional bases, it noted.
Meanwhile, in the residential sector, demand was found to be “particularly resilient” in the Good Class Bungalow (GCB) segment.
Investment sales of homes in general climbed 143.6 per cent from Q2 to S$636.2 million, but still sank 77.8 per cent year on year.
The sector was propped up by a string of GCB deals totalling some S$128.3 million during the third quarter – coming close to the S$166.4 million recorded in the first half of this year. This, said Knight Frank, demonstrated “a strong recovery in demand” for GCBs.
Key transactions in the past three months included the sale of GCBs along Garlick Avenue. The family of Singaporean billionaire Goh Cheng Liang was said to be the buyer of an old bungalow sitting on 101,550 square feet of freehold land on Garlick Avenue, with the price understood to be about S$93 million, The Business Times (BT) reported in September.
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 head of GCB division Henry Lim told BT recently.
As for industrial properties, investment sales grew 133.3 per cent on the quarter to S$406.6 million for the July-September period. However, year on year, it contracted by 45 per cent.
Amid improved sentiment, a warehouse was sold to AIMS Apac Reit for S$129.6 million, while a business park development at 26A Ayer Rajah Crescent by Mapletree Industrial Trust was purchased by Equinix Singapore for S$125 million.
Beyond the Republic’s shores, however, overall investment sales by Singapore-based entities were lacklustre during the quarter.
Outbound investment sales from investors in Singapore shrank 24.3 per cent on the year to S$2.8 billion, from S$3.7 billion in the same period last year, based on available data from 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$900 million), Knight Frank said.
Keppel Reit also bought freehold Grade A commercial property Pinnacle Office Park in Sydney for A$306 million (S$303.3 million), its manager announced last month.
In its report, the Knight Frank research team said that despite the Covid-19 outbreak, Singapore remains an attractive destination for foreign investors due to its comparatively stable economic and political environment that 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 the low interest rate environment.
In August, Cushman & Wakefield’s head of business development services for Singapore and South-east Asia, Christine Li, noted that real estate was being offered to investors at lower prices.
Opportunities in the investment sales market could thus emerge with 10-20 per cent discounts from pre-Covid levels a couple of quarters down the road, Ms Li said then.