Demand for property in the city-state last quarter was broad-based, with CBD offices attracting most of the investment capital while shopping centres and hotel developments were also on investors' radar. (Picture: Samuel Isaac Chua/The Edge Singapore)
SINGAPORE (EDGEPROP) - Commercial real estate investment activity in Singapore rose by 74% y-o-y in 2Q2022 to reach US$5.6 billion ($7.7 billion), according to a market report by MSCI. The global market analytics firm noted that demand for property in the city-state last quarter was broad-based, with CBD offices attracting most of the investment capital while shopping centres and hotel developments were also on investors' radar.
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“Commercial real estate investment in Singapore went quiet during each of the previous two downturns, but 2022 has proven to be the third time lucky with a record level of activity so far. While the broader regional slowdown has largely been attributable to a fall-off in smaller deals, Singapore’s institutionally-dominated market has shrugged off the macroeconomic headwinds,” says Benjamin Chow, head of asia real assets research at MSCI.
However, the rest of the Asia Pacific market did not fare as well, as economic and financial concerns hampered commercial property deal activity in 2Q2022, says MSCI. (Find Singapore commercial properties with our commercial directory)
Last quarter pulled in investment worth US$45.1 billion, representing a 24% decline y-o-y. This was led by a sharp decline in trades of individual properties which totalled US$33.1 billion for the quarter, compared to an average of US$40 billion per quarter in 2021.
The firm noted that the number of active buyers and deals in the region fell, indicating that liquidity in the region has taken a hit. “The rising interest rate environment has taken its toll on deal activity in a number of core markets. Rising borrowing costs have squeezed out smaller buyers, as evidenced by the fact that deals under US$50 million fell the most across all measures of activity,” says Chow.
On a sector basis, industrial properties fared the worst last quarter, with transaction volumes sliding 62% y-o-y to US$7.2 billion. MSCI notes that industrial yield spreads have been squeezed due to higher borrowing costs.
The office sector posted investment deals worth US$22.2 billion in 2Q2022, a 9% y-o-y increase, while retail investment suffered a 30% y-o-y decrease to US$9.6 billion.