Real estate investment sales slow in 4Q2022: Knight Frank

SINGAPORE (EDGEPROP) - Real estate investment sales totalled $31.9 billion in 2022, growing 20.4% y-o-y from the $26.5 billion recorded in 2021, according to research by Knight Frank Singapore. The improvement was supported by the reopening of economies and borders across the globe in the first half of the year.

However, business sentiment tempered in the second half of the year amid fears of an economic downturn, heightened inflation, global political tensions and supply chain disruptions. As such, total investment sales saw a 22% q-o-q fall in 4Q2022 to $4.5 billion.

Read also: Residential investment sales climb 6.6% to $3.58 bil in 3Q2022: Savills

Despite the market turning cautious, Daniel Ding, head, capital markets (land & building, international real estate) at Knight Frank Singapore, notes that the largest sale of the year was reported in the closing days of December 2022 – Hong Kong-listed Link REIT agreed to purchase Jurong Point and Swing By @ Thomson Plaza for a combined $2.16 billion from Mercatus Co-Operative.

Given rising interest rates, Ding opines that institutional funds are more likely to adopt a watch-and-wait approach. “This leaves the door open for private capital, which is not as reliant on debt-financing, to become more active in commercial real estate investments in the months ahead, with Singapore continuing to represent a destination of stability amid the rocky global climate,” he adds. (Find Singapore commercial properties with our commercial directory)

As such, investors’ appetite for strata office space remained healthy in 4Q2022. Two high floors at Springleaf Tower were sold for about $53.9 million ($2,510 psf) to Esteel Enterprise in November, while the fourth floor at 15 Scotts was sold to Cortina Holdings for $49 million in October. “Given the more palatable size and quantum, investments in the strata office market are expected to continue in the coming months,” Ding says.

Overall, commercial sales made up the bulk of investment sales throughout 2022, followed by residential sales. Knight Frank highlights that residential sales were bolstered in 4Q2022 by the award of two Government Land Sale sites, contributing some $520.8 million in sales.

In terms of collective sales, Knight Frank notes the market remains active, with many sites already embarking on the process. “More launches can be expected in 2023 with perhaps better success rates, so long as sellers’ price expectations remain realistic and are measured to a level that is within the risk profile of developers,” comments Chia Mein Mein, head, capital markets (land & collective sale), at Knight Frank Singapore.

Chia adds that the low supply of new inventory may also support developers’ demand for collective sale parcels.

Meanwhile, Singapore recorded outbound investment sales of $13.7 billion in 4Q2022, according to data by Real Capital Analytics. This marks a 22.4% decrease from the previous quarter. Assets acquired consisted mainly of office and logistics buildings, with gateway cities in Japan being the top destinations for Singapore investors.

Significant outbound deals in 4Q2022 included M&G Real Estate’s purchase of a prime-grade office building, Minato Mirai Center, in Yokohama, for more than $997 million, and Gaw Capital Partners’ purchase of a portfolio of logistics assets in Tokyo for some $732 million.

On the whole, Knight Frank views the slowdown in investment activity is likely to remain for 1H2023 until there are more concrete signs of economic stabilisation and improving business conditions. The firm is projecting real estate investment sales to clock in between $22 billion and $25 billion for the whole of 2023.