Real Estate Investment Sales Fell 23.8% Quarter-on-quarter to S$4.13b in First Quarter 2024; Bright Spots in Retail & Hospitality Sectors

Savills Research shares that Singapore’s real estate investment transaction value in the first quarter fell 23.8% quarter-on-quarter (QoQ) to S$4.13 billion.

Main causes for the drop were the absence of mega deals and a dull market for strata-titled commercial units and shophouses. The unsuccessful award of the white site at Marina Gardens Crescent under the Government Land Sales (GLS) Programme was also partially to blame. However, investment sales in the retail and hospitality property sectors have regained strength and contributed significantly to the total number in the quarter.

Well-located suburban malls continued to attract strong interest on the back of improving rents, consistent footfall and thus demand from retailers. The first quarter saw the inking of two big-ticket transactions: Frasers Centrepoint Trust’s acquisition of an additional 24.5% effective interest in Nex located at Serangoon Central from its sponsor Frasers Property, translating to S$3,352 psf on a net lettable area (NLA) basis, and the $550 million purchase of The Seletar Mall by Allgreen Properties from Cuscaden Peak Investments and United Engineers, at about $2,900 psf NLA.

Strong backing from the government coupled with Singapore’s strategic position as a global business and tourism hub have boosted the hospitality sector’s recovery post-pandemic. First quarter saw three transactions in the hospitality sector totalling S$556 million (13.5%) of total investment sales. These were the acquisition of Hotel G by the Ascott Limited and CapitaLand Wellness Fund (C-WELL) for S$238 million; the divestment of Citadines Mount Sophia Singapore for S$148 million by CapitaLand Ascott Trust; and the purchase of the Capri by Fraser, Changi City by TPG Angelo Gordon, Far East Consortium and Atelier Capital Partners for S$170 million.

All in all, the commercial property sector recorded a total of S$1.3 billion worth of investment sales in Q1/2024, a 20.9% fall from the previous quarter. The residential sector achieved a total of S$1.79 billion in investment sales. However, this was a decrease of 48.5% compared with last quarter. (Please see chart below)

On the bright side, the industrial sector saw S$375.4 million in investment sales in Q1, a 25% growth from last quarter, which included the award of one industrial GLS plot through state tender and six deals in the private sector.

The largest private sector transaction was the S$140 million sale of OneTen Paya Lebar, a freehold eight-storey high-tech industrial building housing a data centre, by HWA Hong Corporation. This attests to the attraction of high-quality data centre assets in Singapore by investors and operators, as the city-state consistently ranks as one of the most desirable data centre locations in the world due to its reliable infrastructure, strong cyber-security framework, availability of cloud services and a dense telecommunication network connecting it to other parts of the world.

Jeremy Lake, Managing Director, Investment Sales & Capital Markets at Savills Singapore says, “The investment market is reviving, and buyers and sellers are returning to the marketplace with earnest intentions. Suburban retail and also hospitality properties have been “flavour of the month” and this trend is likely to continue for the foreseeable future with a number of deals in the pipeline. Once interest rates start to fall the number of the investment deals is likely to increase.”

“A rate cut in the US would be welcome news to our real estate market here, especially the institutional grade income producing stock. What we will see transpiring locally is that borrowing costs may decline throughout the course of this year and perhaps into the next. Although borrowing costs are expected to dip, the overall number of commercial deals and the size of deals are still likely to remain below pre-pandemic levels. We maintain our forecast of S$22 to S$23 billion of total investment sales this year,” adds Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore.

Click here to view the Investment Sales Transaction Volume By Property Type, Q1/2024 chart.

Read the full Q1 Sales and Investment Briefing here.