S’pore sees higher direct real estate transactions in Q2

Direct real estate transaction volumes rose 225 per cent year-on-year (y-o-y) in the second quarter of this year to US$2.2 billion (S$2.7 billion).

According to Jones Lang LaSalle’s (JLL) Asia Pacific Capital Markets Bulletin, this was boosted by double-digit growth in the financial services sector which continued to drive gross prime Raffles office rents up 1.5 per cent over the previous quarter, even with significant supply coming on-stream.

On a quarterly basis, direct real estate transactions fell 44.4 per cent, quarter-on-quarter (q-o-q) and was attributed to seasonal reasons.

JLL also noted that strong tourist arrival growth was the main driver in the prime Orchard retail markets with gross retail rents up 0.8 per cent q-o-q.

Capital values in both markets grew faster than rents, leading to yield compression in both markets. Prime yield movement for the office sector was down 36 basis points q-o-q and down 248 basis points y-o-y.

For the retail sector, prime yield movement was down 12 basis points q-o-q and down 27 basis points y-o-y.

In terms of direct real estate transactions in the quarter, the Raffles Hotel and its accompanying shopping arcade was sold by Fairmont Hotels to Qatari Inc for S$341 million at an estimated yield of 5.2 per cent. This deal was started last year but has recently been completed this year in June.

Hotel deals played a big role in the quarter with the Crowne Plaza Hotel near Changi Airport sold to unlisted developers OUE by LaSalle Asia Opportunity II fund and LC Development. This deal was worth S$225 million.

JLL noted that the biggest non-hotel direct buyers were domestic unlisted developers and listed REITs, with a particular focus on industrial assets and secondary transactions as prime office and retail stock continued to remain scarce. “We expect capital values for prime plays to continue to grow as strong investor demand chases limited investable stock,” JLL added.

For the Asia-Pacific region, investment volumes increased by 11.1 per cent y-o-y to US$19 billion. Domestic deals registered hit US$11.2 billion while cross-border Asia money accounted for US$4.5 billion. Inter-regional funds made up US$3.3 billion in deals.

JLL believes total investment volume is still targeted to reach US$100 billion by end this year.

Source : Today – 22 Aug 2011

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