Commercial sector leads Singapore’s real estate investment sales growth in 3Q2019

SINGAPORE (EDGEPROP) - Singapore’s commercial property sector led the overall real estate investment sales growth in 3Q2019, according to a report by Colliers International. Commercial real estate investment sales came in at $4.6 billion in the quarter, increasing 3.2% q-o-q, and accounted for 41% of the total volume of property investments during the period.

Given the strong investment interest in commercial real estate, the sector could hit a record high for the whole of 2019, besting the $12.5 billion recorded in 2007.

Jerome Wright, director of capital markets at Colliers, says: “There was strong demand for commercial (office and retail) properties in 3Q2019, with increasing foreign interest. Given Singapore’s strong market fundamentals and the favourable interest rate environment, we should expect investors’ interest to remain elevated.” He adds that incentives to redevelop older office buildings in the CBD, “coupled with tight vacancies and a light new supply pipeline, should encourage more investments into the sector”.

All in, real estate investment sales in Singapore came in at $11.2 billion in 3Q2019, climbing 53.7% q-o-q. The growth was spurred by stronger sales across all property segments.

Colliers Research estimates that the whole of 2019 could see total investment sales worth $33.8 billion, putting it on a par with the previous year.

“Amid unprecedented levels of uncertainty in the global environment, Singapore remains firmly on investors’ radar owing to its growth potential, stable government, and pro-business policies,” says Tricia Song, head of research for Singapore at Colliers International. “Therefore, we expect Singapore real estate – particularly commercial and hospitality assets – to continue to attract interest.”

Residential investment sales also performed strongly in 3Q2019, increasing 90.1% q-o-q and 4.7% y-o-y to $3.1 billon. This sector accounted for 27% of the total transaction volume in the quarter.

Government land tenders contributed 62% of the value of all deals. Four sites – Clementi Avenue 1, Tan Quee Lan Street, Bernam Street, and one-north Gateway – with a combined value of $1.9 billion, were awarded. Luxury home sales contributed to residential investment volume, and transactions in this segment jumped 62.4% q-o-q and 53.8% y-o-y to $1.1 billion in 3Q2019.

But Colliers says that given the weaker collective sales market, overall residential sales this year could fall 55% compared to 2018.

Meanwhile, hotel deals surged 545% q-o-q and more than 18 times y-o-y to $2.8 billion in 3Q2019. This was led by significant transactions including Bay Hotel, Mandarin Orchard, and Crowne Plaza Changi Airport. The volume of transactions is also the highest ever recorded for the sector on a quarterly basis, notes Colliers.

“We believe the hospitality segment presents good prospects amid robust international visitor arrivals and generally healthy tourism outlook,” says Song, adding that additional investments in the meetings, incentives, conferences, exhibitions (MICE) and leisure segments should attract corporate and leisure travellers over the next three to five years.