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Investment market to remain in price discovery mode in 1H2023: Colliers

/ EdgeProp Singapore |

January 19, 2023 5:51 PM SGT

Colliers is projecting investment sales to clock in around $25 billion in 2023, a decline of 15% y-o-y (Picture: Albert Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) - Investment sales fell 10.8% q-o-q to $5 billion in 4Q2022, as borrowing costs and macroeconomic uncertainty dampened activity, according to research by Colliers. Nonetheless, the consultancy notes that total investment volume in 2022 came up to $29.1 billion, representing a 2.8% increase y-o-y, bolstered by an active first half of the year.

total investment sales - EDGEPROP SINGAPORE

Source: Colliers/URA/RCA

Despite the slower activity in 4Q2022, the quarter saw a few large transactions take place. These include the divestment of Jurong Point and Swing By @Thomson Plaza by Mercatus Co-operative for $2.161 billion, the sale of a 50% stake in Lazada One by ARA Asset Management for $361.49 million, as well as some public residential land sales.

The divestment by Mercatus bolstered commercial sales in 4Q2022, with the segment registering an 87.7% q-o-q surge to $2.8 billion. For the full year, commercial sales jumped 78.7% y-o-y to $11.4 billion. (Find Singapore commercial properties with our commercial directory)

Residential sales declined 51.7% q-o-q to $1.3 billion, underpinned by a slowdown in collective sales and luxury sale activities, notes Colliers. For the whole of 2022, residential sales fell 18.1% y-o-y to $10.5 billion.

Meanwhile, industrial deals declined 39.7% q-o-q to around $400 million, which the consultancy attributes to several sizeable transactions still pending JTC approval. For the full year, industrial sales fell 59.7% y-o-y.

Source: Colliers/URA/RCA

Colliers anticipates the investment market to remain in price discovery mode in the first half of the year, as investors adjust to the new normal of higher interest rates and slower growth. It is projecting investment sales to clock in around $25 billion in 2023, a decline of 15% y-o-y. In addition, it expects deals to be more “bite-sized”, as larger deals would generally involve a longer time frame and higher leverage.

However, the consultancy views a pick-up in activity could happen in the second half of 2023 as the course of inflation and interest rates become clear. “Despite yield spreads narrowing, for those looking to invest in quality core assets, Singapore properties still offer long-term capital appreciation potential for decent total returns,” remarks Tang Wei Leng, managing director and head of capital markets & investment services, Singapore at Colliers.

Tang adds private wealth investors may become more prominent in the market this year as tighter financing conditions and other macroeconomic headwings prompt institutional investors to take a back seat. She anticipates private wealth capital to focus on the luxury residential market, strata-titled commercial space and shophouses.

Meanwhile, Catherine He, Colliers’ director and head of research, Singapore, comments that prime logistics and prime office capital values will continue to be supported by positive rental growth and ample liquidity. In addition, prime retail capital values are expected to recover over the next few quarters. “As such, net yields are likely to remain relatively stable until transactions pick up in the second half of 2023,” she says.

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