Real estate investment sales in the third quarter more than doubled to S$16.74 billion from S$6.7 billion in the previous quarter, on the back of a commercial sector surge from big ticket office transactions.
This was also 49 per cent higher than the volume of the first and second quarter combined, said a Cushman & Wakefield report on Monday.
The commercial sector led sales volumes with S$6.27 billion in sales. The largest office transaction of the year went to Allianz Real Estate and Gaw Capital Partners acquiring Duo Tower and Galleria – located in the Bugis sub-market – from M+S for S$1.58 billion or S$2,570 per square foot (psf).
Another transaction in the Bugis sub-market was Angelo Gordon and TCRE Partners’ purchase of Bugis Junction Towers from Keppel Reit for S$547.5 million or S$2,200 psf.
The retail sector also saw some activity, with Lendlease injecting [email protected] into its Reit (real estate investment trust) for S$1 billion. Lendlease Global Commercial Reit’s initial public offering was also well received by the market with a share price rise of 4.5 per cent on the first day, the Cushman report added.
Industrial sector transactions recorded a total of S$4.07 billion in the third quarter, with industrial investment volume driven by Reits.
Mapletree Investments injected Mapletree Business City II into Mapletree Commercial Trust for US$1.55 billion or S$1,308 psf. The data centre segment also saw Keppel DC Reit continuing to grow its portfolio by purchasing 1-Net North Data Centre for S$201.8 million, as well as a 99 per cent stake in Keppel DC Singapore 4 for S$384.9 million.
The residential sector, meanwhile, accounted for S$3.03 billion, while the hospitality sector recorded S$2.92 billion with higher investment volumes.
The hospitality sector saw Royal Group selling Darby Park Executive Suites for S$160 million to Indonesian tycoon Bachtiar Karim, after its initial purchase from Sime Darby Group last year. This resulted in a 72 per cent profit after the site was rezoned from residential to hotel use.
PAM Holdings and Datapulse Technology bought Bay Hotel Singapore for S$235 million, while a joint venture by Hong Kong financial services firm AMTD Group and Far East Consortium International acquired Oakwood Premier OUE Singapore for $287.1 million.
2019’s year-to-date volume stands at S$27.98 billion from the third quarter’s contribution, and is “increasingly likely” to surpass 2018’s volume of S$33.96 billion, Christine Li, Cushman & Wakefield’s head of research, Singapore and South-east Asia, said.
Singapore’s Grade A central business district (CBD) office capital value marginally rose to S$2,930 psf, while yields remained stable at 3.20 per cent.
“Slight yield compression could occur in 2020 if investor demand for assets in safe havens like Singapore increases amidst greater unrest in Hong Kong and the escalation of the US-China trade war,” Ms Li added.
That being said, capital value gains could be mild on expectation that rents will peak in 2019 in view of the subdued economic outlook.
Shaun Poh, Cushman & Wakefield’s executive director of capital markets, added that in a tight commercial supply market such as Singapore’s, it is tempting for assets to chase price gains – which is where the market is headed now, creating a gap between sellers and buyers’ expectations.
“Still, Singapore’s gateway city status and its stable fundamentals make it an attractive destination for foreign funds,” Mr Poh said.