Investment sales in the real estate sector significantly increased in the first quarter of 2023

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The real estate industry has seen a huge rebound in the value of investment sales in the 1Q2023, as per the press release issued on April 21 from Savills Research. According to the firm the investments in real estate rose 100.4% q-o-q to $5.63 billion in 1Q2023, an increase by $2.81 billion in the 4Q2022. The increase was driven due to the closing of high-value deals like Link REIT’s $2.16 billion purchase of Jurong Point and Swing By at Thomson Plaza.

Commercial property sector experienced an increase of 229.6% q-o-q increase in the 1Q2023 investment sales to $3.38 billion. The main reason for this was retail transactions that saw an increase in sales of Jurong Point and Swing By @ Thomson Plaza and the $652.5 million transfer of fifty% part of Nex for Frasers Centrepoint Trust and Frasers Property. Together, these transactions were worth around $2.81 billion (or 83.3%, of the total value of commercial transactions.

In the case of strata office units value fell in 5.4% q-o-q, from $306 million in the 4Q2022 period to $290 million in the first quarter of 2023. But, Savills highlights that buying growth in the market continues with the selling of three floors at The Solitaire on Cecil, which is a freehold office development of 20 stories located in the CBD. The deal was brokered by Savills was completed with the 17th 19th, 18th and 20th floors, which amounts to $4300 per square foot across the space of 37,857 square. ft. that were purchased at $162.8 million. Savills claims that the sale is one of the biggest strata office transactions in terms of quantum since January 2022.

The retail sector also saw an increase in investments sales by 11.2% q-o-q, from $172.7 million in 4Q2022 and $193.2 million in the 1Q2023. The biggest deal quantifiable in terms of price was the acquisition of six shophouses that were freehold in the vicinity of Serangoon Road for $62.5 million by a union that is affiliated with Singapore’s National Trade Union Congress. Another notable deal was the purchase of a six-storey shophouse in 52 Boat Quay for $37 million that was arranged by Savills.

The value of investment in properties and residential sites and properties was $1.58 billion in the 1Q2023. Despite not having Government Land Sale sites awarded to residential properties, the sector saw an increase by 12.5% in investment sales between $1.4 billion for 4Q2022 and $1.58 billion by the end of 1Q2023. Similar to this the market for collective sales was booming in the 1Q2023 period following a slow 4Q2022, which saw three private residential sites being sold to the tune of $583.8 million in the 1Q2023. The largest transaction was from Meyer Park in District 15 that was purchased through a joint venture of UOL Group and Singapore Land Group for $392.2 million.

Despite some optimism on markets, developers remain cautious, and tend to focus on smaller to medium-sized sites with prime locations. As demonstrated by the sales that took place at Meyer Park and Bagnall Court, a realistic price is crucial to an effective collective sale, Savills says. Savills.

In the end, Savills notes that the positive figures from the 1Q2023 period could suggest that the real estate market is still stable despite of global economic difficulties. While the majority of institutional investors and corporate buyers remained on the edge and remained in the shadows, ultra-high net worth people (UHNWIs) made up the difference. “UHNW individuals are active and resilient because of Singapore’s safe haven status as well as its position to be”the Switzerland of Asia,” says Jeremy Lake who is the director of capital markets and investment sales at Savills.

Furthermore, the financial fallout across both the US and Switzerland may have prompted UHNWIs to invest in properties in safe havens like luxurious homes, strata offices, and shophouses. “UHNWIs could be the main factor driving investment sales, because the crisis in the global banking industry could cause them to look at real property,” says Alan Cheong the director of research and consulting at Savills.

However, this category of buyers have an inclination to not lodge caveats. Thus, although the data available to the public may indicate that investment sales are in line to 2022’s $24.7 billion, the likelihood that it will be higher is increasing the tail risk, according to Savills.

“Strengthening headwinds created by the world economy will not deter the UHNWIs to invest into Singapore real estate market, since they have different expectations for investment than institutional customers which are presently impacted by the financial markets.” states Marcus Loo, CEO of Savills Singapore.