Singapore commercial real estate investments rake in US$4.1 bil in 4Q2023: Knight Frank

Singapore’s commercial real estate market grew 462% on a quarterly basis in 4Q2023, clocking in US$4.1 billion ($5.5 billion) in transactions. This also reflects a 110% y-o-y increase compared to the same period in 2022. The data was reported by Knight Frank in its market report published on Feb 7.

This is the highest fourth-quarter commercial investment statistics in five years and surpasses the average quarterly increase of US$2.5 billion that was recorded across key Asia Pacific markets last quarter. As a result, Singapore took the top spot in terms of commercial real estate investment growth in the region, says Christine Li, head of research, Asia Pacific, Knight Frank.

The success of the commercial real estate market here was buoyed by several substantial office transactions, including the collective sale of Shenton House which was purchased for $538 million last November, and the sale of VisionCrest Commercial for $450 million which also occurred last November.

“The deals occurred despite the weaker investor sentiments due to fluctuations in interest rate movements and diverging expectations between buyer and seller on asset valuations. The successful execution of these large-scale transactions highlights the underlying strength of Singapore's commercial real estate market,” says Li.

She adds that the confidence in commercial real estate in Singapore suggests that as interest rates stabilise later this year and repricing slows, pent-up demand for office assets may drive recovery for the sector by the end of this year.

Neil Brooks, global head of capital markets at Knight Frank, echoes similar sentiments for the global commercial real estate market. “Ongoing transactions in early 2024 suggest improving investor sentiment. Despite challenges such as tight yield spreads and high borrowing costs, the Federal Reserve maintained steady interest rates in the January 2024 meeting while advising against a rate cut in March. Our outlook anticipates rate cuts to occur after mid-year 2024, which is likely to coincide with a more active investment market.”

The Knight Frank report also highlights two noteworthy markets that dominate investor interest — office assets in Seoul as well as multi-family assets.

“Seoul's office market has experienced significant growth in recent years, with office rents increasing more than 17% since 2020 and vacancy rates compressing to less than 1%. This strong performance has positioned it as the best-performing office market in Asia,” says Li.

Investors are also starting to venture into multi-family assets outside of Japan, traditionally the most established multi-family market in the region, says Emily Relf, head of living sectors, Asia Pacific, Knight Frank. She adds that last year investment volume into this asset class diversified into Australia, Mainland China, and Hong Kong.