Commercial property pick up pace in 3rd quarter 2020

In the Singapore real estate investment sales market, the buzz may return, with interest and activity returning in the commercial sector , in particular during the quarter of July to September.

But, according to Knight Frank yesterday, investment revenues-identified as transactions exceeding $10 million and more-were still down 55.1 percent year on year in the third quarter at around $4.4 billion.

It also noted that during the three months, no transactions were completed in the public sector as no sites were sold under the government’s land sales program.

Significant commercial transactions were “prevalent” as after Covid-19 pandemic-related sanctions, the economy started to reopen.

These commercial deals include the sale to TCC Group of a stake in Frasers Property’s Northpoint City for $550 million and the sale by Tuan Sing Holdings of Robinson Point for $500 million.

The research team wrote, “There remains considerable interest in commercial properties , particularly in the Core Central Region (CCR) with the potential of existing buildings to tap into the CBD Incentive Scheme.”

For such assets, however, there is limited saleable stock available, it added.

International investors from Singapore are also keen to expand their operations.

Knight Frank said, “Alibaba purchased a 50% stake in AXA Tower and ByteDance too, set to set up their office in Singapore are just the beginning of the potential demand from technology companies based in China.”

Technology companies are likely to show a growing interest in acquiring commercial properties for regional bases in the year ahead, it noted.

Meanwhile, in the Good Class Bungalow (GCB) category, demand in the residential sector was found to be “especially resilient.”

During the third quarter, a series of transactions totaled some $128.3 million-coming close to the $166.4 million reported in the first half of this year. This has demonstrated a “solid demand recovery,” said Knight Frank.

In the past three months, key transactions have included the selling of GCBs in Garlick Lane.

It was said that Goh Cheng Liang ‘s family, Singaporean billionaire was the buyer of a huge freehold bungalow of about 101,550 sq ft land at a price of approximately $93 million.

But even as trade in Singapore’s luxury development has continued in the midst of the pandemic, it may be unlikely to reach the 2019 volume as buyers are now more cautious, Mr Henry Lim, the head of the GCB division of ERA Realty, said recently.

In the third quarter, investment sales of industrial assets rose to $406.6 million amid improving sentiment.

A warehouse was purchased by AIMS Apac Reit for $129.6 million, while a business park development at Ayer Rajah Crescent was sold to Equinix for $125 million.

But during the quarter, total investment sales by Singapore-based companies overseas were lacklustre.

Based on Real Capital Analytics, outbound investment revenues from investors here decreased 24.3 percent, from $3.7 billion in the third quarter last year to $2.8 billion.

Significant outbound deals included the acquisition by a joint venture between Yanlord Land Group and Huafa Industrial for 4,5 billion yuan (S$909 million) of a low-density prime residential development site in Shanghai, Knight Frank said.

Keppel Reit also purchased Pinnacle Office Park in Sydney for A$ 306 million (S$298 million) of freehold Grade A commercial property, its manager reported last month.

The Knight Frank research team said that Singapore remains an attractive destination for foreign investors amid the Covid-19 outbreak, owing to its comparatively secure economic and political climate, which is not as vulnerable to geopolitical uncertainties as other gateway cities.

Singapore’s investment property demand is expected to increase in the coming months, as investors are keen to continue exploiting the opportunities and low interest rates available.

Ms Christine Li, head of business development services for Singapore and South-East Asia at Cushman & Wakefield, noted in August that real estate was being sold at lower rates to investors.

Opportunities in the investment sales sector could thus emerge a few quarters down the road with 10 percent to 20 percent discounts from pre-Covid prices, Ms Li said then.