Singapore On Track For Record Real Estate Deals In 2017: RCA

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Singapore posted one of the strongest performances in inbound real estate investment volume in the Asia-Pacific region for the first quarter this year.

The total deal value increased 170 per cent to reach US$2.3 billion, from US$838.2 million a year ago, according to a report released by Real Capital Analytics (RCA) on Friday.

Petra Blazkova, RCA's senior director of analytics for Asia-Pacific, told The Business Times: "In the last couple of years, Singapore has been through fairly slow market growth on the rental income side. The economy was quite subdued, so investors were shying a little bit away from Singapore because they couldn't foresee when the trend for growth would come.

"I don't necessarily see the strong rental growth appearing in the market as we speak right now, but somehow confidence has returned to the market, and I think it started with the first sale of Asia Square Tower One last year. That was the trigger."

As at April 2017, there were some 18 deals worth a total value of US$5.3 billion in contract.

These include the potential sale of Asia Square Tower Two, purportedly to CapitaLand and CapitaLand Commercial Trust at close to S$2,800 per square foot on net lettable area, as well as Jurong Point, which is in the midst of being transacted at S$2.2 billion between buyer Mercatus Co-operative and seller, a joint-venture between Lee Kim Tah Holdings and Guthrie GTS.

At this rate, Singapore appears to be on track to achieve record volumes in 2017, said Ms Blazkova.

"That's quite a high number for a relatively small market like Singapore. It's quite a good mix, too," she added, looking at the deals in the pipeline. "There are a few office transactions, some retail and also some industrial."

Most other markets in the region - Japan, China, Hong Kong, Australia, India and Taiwan - showed a drop in investment volumes, which RCA attributed to a shortage of investment-grade properties in the region's commercial real estate markets. Many real estate owners are also opting to retain their holdings on their assets.

Overall, the value of completed transactions for income-producing real estate in the Asia-Pacific fell by 21 per cent year on year for the first three months to US$22.6 billion - the lowest figure recorded since Q2 2010.

Australia led the slowdown in investments with a 59 per cent slide in deals, as it was the hardest hit by the imbalance in investment-grade properties.

Ms Blazkova said that in most places, there is a large group of investors looking at a small pool of assets, whereas in Singapore there has been a fair amount of assets available for sale, which has helped to support its transaction volume.

"It's the behaviour of the sellers in Singapore at the moment after a long time of sitting on their assets," she said.

Acute shortages of available stock in other countries have also affected pricing, and a mismatch in pricing expectations between buyers and sellers can lead to stalemate in closing deals.

The top three markets with the highest investment volume in the first quarter - Japan, China and Hong Kong - each registered weaker investment flows, contrasting against particularly strong activity registered in the same period of 2016.

In its data collection, RCA considered only deals worth at least US$10 million. It also excluded sales of development sites and interested party transactions, such as the divestments of assets from sponsors to trusts.

Investment sales data tends to differ from brokerage to brokerage due to differing definitions of what is considered a completed sale.

Source: Business Times, 13 May 2017