Singapore commercial property sales hit US$3b

US$3.14 billion worth of direct commercial property investment deals in Singapore for the third quarter of 2010 was the third highest in the Asia-Pacific region behind Japan and Australia.

In terms of quarter-on-quarter growth, the 358 per cent increase recorded for Singapore in Q3 placed it as the top market mover in the region for the quarter, according to Jones Lang LaSalle.

Major deals in the July-September 2010 period include DBS Towers, Chevron House, StarHub Centre, Chinatown Point and CWT Commodity Hub.

For the Asia-Pacific region, direct commercial property investment sales volumes rose 14 per cent quarter-on-quarter to US$18.2 billion in Q3 2010. The figures cover direct transactions involving office, retail and industrial property, but exclude development sites.

Capital values and investment activity of such real estate in the region both moved upward in Q3 as the investment market continued to strengthen, underpinned by more buoyant investor confidence, said JLL.

Office capital values in the Hong Kong (Central) and Beijing (CBD) markets posted quarter- on-quarter increases of 8.7 per cent and 8.6 per cent respectively. In Shanghai and Beijing, investor sentiment remained buoyant with Asian buyers active in the market, underpinned by rental growth.

Most Asian markets saw office yields compress slightly by up to 30 basis points, with increased investment activity in Australia supporting tightening investment yields in both Sydney and Melbourne, JLL said.

JLL’s head of Asia Pacific capital markets Stuart Crow said: ‘As the market continues to stabilise, we are seeing more and more investors looking to pursue transactions. We will continue to see a further increase in these volumes to the end of this year, but the number of buyers versus sellers is likely to come back to more realistic levels next year.’

The report mentions that investors are likely to be attracted to assets that offer good inflation protection by allowing continuous re-pricing of income streams.

‘Retail assets have been popular with investors in 2010; usually they account for around 17 per cent of total investment deals but this year are reaching a share of about 22 per cent, and this may be expected to continue into next year,’ JLL said.

Megan Walters, head of research for JLL capital markets, said: ‘We are seeing rising interest from inter-regional investors who are looking at the differential in growth rates between Asia Pacific and the rest of the world. However, the constraint to increasing Asian investment volumes will be the limited availability of investment-grade assets. This is in part from the restrictions on land ownership placed in some countries in Asia, for example on foreign ownership, and in part from existing investors unwilling to part with their hard-won Asian assets at a price buyers want to pay.

‘The outcome may be continued upward pressure on pricing up in major Asian cities, as yields become compressed compared to what one can achieve in mature markets such as London.

‘The alternative for investors in Asia will be to look at the emerging markets and second- tier cities. Next year’s investment volumes for Asia Pacific are estimated at around US$88 billion, broadly 15 per cent above the likely 2010 total volumes,’ she added.

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