Investment sales jump 49% q-o-q to $6.7 bil in 2Q2019

Total real estate investment sales volume surged 49% q-o-q to $6.7 billion for the second quarter of 2019, according to a report by Cushman & Wakefield (C&W). Commercial investment deals worth $3.5 billion made up 52% of the total figure.

For the first six months of this year, total investment sales volume stood at $11.2 billion. The consultancy expects the investment volume to come in at about $25 billion for the whole of 2019.

“The favourable interest rate environment with potential Fed rate cuts in the coming quarters should continue to boost interest in real estate investment. Prices are riding on the expectation that yield-hungry investors will be diverted from the bond market to the commercial property market due to the widening yield spread,” says Christine Li, C&W’s head of research for Singapore and Southeast Asia.

The largest deal last quarter was the $1.03 billion acquisition of Chevron House by AEW Asia. This was followed by the acquisition by South Korea’s National Pension Service of half a stake in Frasers Tower. The suburban office segment saw Metro Holdings and Evia Real Estate buy 7 & 9 Tampines Grande for $395 million.

More commercial deals are already in the works for the remaining months of this year. Arch Capital Management is undertaking due diligence to acquire Anson House for about $210 million, while GAW Capital Partners and Allianz Real Estate are in advanced negotiations to acquire DUO Tower and DUO Galleria for about $1.6 billion, the report says.

These big ticket deals will continue the investment sales momentum so far this year, and “with assets in the CBD highly sought after, investors may increasingly look more closely at the decentralised office market for opportunities similar to 7 & 9 Tampines Grande”, says Li.

Renewed interest in commercial properties in the CBD has been encouraged due to the CBD Incentive Scheme, part of the 2019 Draft Master Plan, says Shaun Poh, head of capital markets at C&W. “[This scheme] has attracted the attention of commercial landlords who are interested in redeveloping their properties. This has led to some owners of adjacent smaller plots contemplating the possibility of joining forces to qualify for the scheme,” he says.

However, the anticipated rejuvenation will take time to materialise due to the time required to conduct due diligence and obtain the appropriate planning approvals, he adds.

The retail sector in 2Q2019 saw Mitsubishi Estate and CLSA acquiring Chinatown Point Mall for $250 million, while Frasers Centrepoint Trust purchased a one-third stake in Waterway Point for $440.6 million. In the industrial sector, CapitaLand divested 11 StorHub warehouses for $166.4 million, and ESR-REIT bought a 49% stake in Poh Tiong Choon Logistics Hub for $110.3 million.