Property investment sales worth $38.3 bil expected this year, buoyed by non-residential sales

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February 20, 2019 4:25 PM SGT

Real estate investment sales in Singapore are expected to reach $38.3 billion this year, a 0.7% increase from $38 billion recorded in 2018, says Colliers International. Non-residential deals are expected to mitigate the expected slower residential market. Last year, investment sales fell 5.1% y-o-y due to unexpected property cooling measures in July that caused a slump in residential investment sales, and a lack of public land sales across all sectors.

“The yield spread (of Singapore real estate) continues to be one of the more attractive across markets,” says Tang Wei Leng, managing director at Colliers International. Pro-business policies and the Smart Nation push will drive up demand for office, industrial and hospitality properties, she says. “In particular, hospitality will be an interesting sector to watch.”

Residential

A strong showing in 1H2018 pushed up overall residential investment sales by 1.4% y-o-y to reach $22.1 billion. It is also the highest-ever investment volume growth on a yearly basis. Collective sales, at 35 deals worth $10.01 billion, accounted for 45% of investment sales last year.

Developers will be cautious and will focus on their upcoming new launches this year, and residential investment sales are expected to be relatively subdued in 1H2019, says Tricia Song, Colliers’ head of research for Singapore. Investment volume and buyer sentiment are expected to pick up from 2H2019, but some en bloc developments have adjusted their asking prices down, she says.

The $980 million en bloc deal for Pacific Mansion done by a GuocoLand-Hong Leong joint venture in March last year. (Picture: URA)

The largest transaction last year was the government land tender for the Holland Road mixed-use site, awarded to a consortium of Far East Organization’s subsidiaries for $1.21 billion in May. Other top deals included the Silat Avenue government land sold by tender to UOL Group for $1.035 billion, and the $980 million en bloc deal for Pacific Mansion done by a GuocoLand-Hong Leong joint venture.

Good Class Bungalow sales for the whole of last year rose by 16% y-o-y to $1 billion across 42 transactions. It is the highest value since 2012 when 50 GCBs were sold for $1.1 billion. GCB sales last year accounted for 5% of residential sales volume.

Commercial

Commercial sales in 2018 came in at $6.2 billion, a 47% fall from a year ago which saw landmark transactions like Asia Square Tower 2 and the Beach Road government land site. Sales for 4Q2018 rose 8.6% q-o-q, the highest growth in the year, driven up by the sale of Robinson 77 for $710 million and 78 Shenton Way for $680 million. The latter was co-brokered by Colliers. More major commercial deals are expected this year based on an overall confidence in office rental growth. Office rental is forecast to increase by an average of 5% over the next four years, says Jerome Wright, director of capital markets and investment services at Colliers. New office supply is also expected to be limited over the next three to five years, he adds.

In 2018, the volume of shophouse transactions hit a record high of $1.2 billion, in line with a three-year trend. Demand for such properties from boutique investors is expected to remain strong for the next three years as the relatively low absolute prices remain attractive.

Hospitality

Meanwhile the hospitality sector booked the strongest investment sales volume in four years at $1.2 billion last year, contributed by a surge in investments last quarter. Sales rose by 445% q-o-q and 421% y-o-y to $792 million in 4Q2018. They were led by the acquisition of Golden Wall Centre, a commercial property, by Worldwide Hotels for $276 million. A unit of Fragrance Group bought the residential Waterloo Apartment for $131 million. Both properties will be redeveloped for hotel use.

Golden Wall, a commercial property off Rochor Canal Road, will be redeveloped into a hotel. (Picture: Edmund Tie & Company)

Buying momentum is expected to continue this year, as Colliers expects the hotel industry to see the revenue per available room grow 3.5% y-o-y this year. This comes on the back of record level tourist arrivals and tightening hotel room supply.

Industrial

The industrial sector saw investment sales worth $4.4 billion last year, increasing 5.8% y-o-y. This is the highest sales volume achieved since 2011, which also recorded $4.4 billion worth of sales. Industrial sales grew 70% q-o-q and 229% y-o-y to $2.1 billion in 4Q2018. Colliers says the industrial market is set to bottom-out, and CapitaLand’s $11 billion acquisition of Ascendas-Singbridge last month is a “vote of confidence” for the sector.

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