Real estate sector shows significant bounce-back in investment sales in 1Q2023: Savills

By Jennifer Venkat
/ EdgeProp Singapore |
The NEX building. (Photo: Savills Singapore)
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SINGAPORE (EDGEPROP) - The real estate sector has experienced a significant bounce-back in investment sales value for 1Q2023, according to an April 21 press release by Savills Research. According to the consultancy, real estate investment sales increased 100.4% q-o-q to $5.63 billion in 1Q2023, up from $2.81 billion in 4Q2022. The growth was boosted by the closure of big-ticket transactions such as Link REIT’s $2.16 billion acquisition of Jurong Point and Swing By @ Thomson Plaza.
The commercial property sector saw a 229.6% q-o-q increase in investment sales in 1Q2023 to $3.38 billion. This was largely underpinned by retail transactions, which saw a boost from the sale of Jurong Point and Swing By @ Thomson Plaza, along with the $652.5 million sale of a 50% stake in Nex to Frasers Centrepoint Trust and Frasers Property. Together, the transactions accounted for about $2.81 billion, or 83.3%, of the total commercial transaction value. (Find Singapore commercial properties with our commercial directory)
savills investment sales report table 1 - EDGEPROP SINGAPORE
In terms of strata office units, transaction value dropped by 5.4% q-o-q, from $306 million in 4Q2022 to $290 million in 1Q2023. However, Savills highlights that buying momentum in the sector continues, including the recent sale of three floors at The Solitaire on Cecil, a 20-storey freehold office project in the CBD. The deal, brokered by Savills, saw the 17th, 18th and 20th floors – or $4,300 psf across the blended strata area of 37,857 sq ft – sold for $162.8 million. Savills says the sale marks one of the largest strata office transactions by quantum since January 2022.
The shophouse sector also saw an uptick in investment sales by 11.2% q-o-q, from $172.7 million in 4Q2022 to $193.2 million in 1Q2023. The largest deal in terms of quantum price was the purchase of six freehold shophouses along Serangoon Road for $62.5 million by a union affiliated with Singapore’s National Trade Union Congress. Another significant transaction was the sale of a six-storey shophouse at 52 Boat Quay for $37 million, which was brokered by Savills.
savills investment sales report table 2 - EDGEPROP SINGAPORE
Investment value for residential sites and properties amounted to $1.58 billion in 1Q2023. Despite there being no Government Land Sale sites awarded, the residential sector recorded a quarterly growth of 12.5% in investment sales, from $1.4 billion in 4Q2022 to $1.58 billion in 1Q2023. In a similar vein, the collective sales market gained momentum in 1Q2023 following a relatively quiet 4Q2022, with three private residential sites being transacted for a total of around $583.8 million in 1Q2023. The biggest transaction was that of Meyer Park in District 15, which was acquired by a joint venture between UOL Group and Singapore Land Group for $392.2 million.
Despite some optimism in the market, developers continue to be cautious and focus on small to medium-sized sites in prime locations. As exemplified by the sales of Meyer Park and Bagnall Court, realistic pricing is the key to a successful collective sale, says Savills.
Overall, Savills notes that the encouraging figures of 1Q2023 may indicate that the real estate market remains stable in spite of global economic challenges. While most institutional investors and corporate buyers stayed on the sidelines, ultra-high net worth individuals (UHNWIs) filled the gap. “UHNW private buyers are more resilient and active due to Singapore’s safe haven status and its status as the Switzerland of Asia,” says Jeremy Lake, managing director of investment sales and capital markets at Savills.
Additionally, the bank fallout in the US and Switzerland could have encouraged UHNWIs to buy real estate in safe havens, such as luxury apartments, strata offices and shophouses. “UHNWIs may be the dominant driving force in investment sales, as the turmoil in the global banking industry may induce them to turn towards real estate,” says Alan Cheong, executive director of research & consultancy at Savills.
However, this group of buyers has a lower propensity to lodge caveats. Therefore, while publicly available data may show investment sales in line with 2022's $24.7 billion, the possibility of it being larger is an increasing tail risk, says Savills.
“Strengthening headwinds generated in the global economic scene are unlikely to deter UHNWIs from investing in Singapore real estate, as they have different investment aspirations from those of institutional clients that are currently impacted by the financial markets,” says Marcus Loo, CEO of Savills Singapore.
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