Jerome Wright, Senior Director, Capital Markets discusses Singapore's propery investment outlook with Howie Lim on Powering Your Property, MONEY FM 89.3
Our latest Growing Investment Momentum | Investment Sales Q1 2021 report concludes that property investment sales in Singapore are expected to return to pre-Covid-19 levels over the next three quarters of the year. On Powering Your Property, Howie Lim speaks to Jerome Wright, Senior Director, Capital Markets, Colliers and get more insights.
Listen to full podcast here.
Howie Lim:Total investment sales grew 25.8 per cent quarter on quarter and 47.9 per cent year on year (ex-mergers and GLS) in Q1. Tell us more about these figures.
Jerome Wright: If you look at Q1 2021, the total investment sales fell 73.8% QOQ. However, this was from a pretty high base since we had the merger of CapitaLand Commercial Trust and CapitaLand Mall Trust and included Government Land Sales (GLS) in Q4 2020.
However, if we exclude all these for a fair comparison, total investment sales actually grew 26% QOQ and 50% YOY, which is very exciting.
This suggests that investor sentiments continue to improve and expect stronger sales in the next few quarters through 2021.
How did the different sectors perform? What were the main drivers that led to Singapore’s real estate performance investment in Q1?
Let’s look at the three key sectors:
Commercial
Excluding the mergers and GLS, Commercial investment sales performed best, surging 377% QOQ to SGD1.1bn, driven by Allianz Real Estate acquiring a 50% interest in OUE Bayfront from OUE Commercial REIT for SGD634 million and Frasers Centrepoint Trust’s divestment of YewTee Point, a suburban mall, for SGD220 million.
Industrial
Industrial investment sales came in second, growing 140% QOQ to almost $1Billion; this was largely made up with the setting up of the 14-property SGD469 million Boustead Industrial Fund and the sale of Admirax, a high-specification light industrial building for SGD142 million.
Residential
Residential investment sales grew 13% QOQ with the interesting deal with the sale of the high-end residential Eden development for SGD293 million to a Taiwanese family, reflecting strong foreign interest.
There is clearly momentum gathering across all sectors!
When you compare Singapore against other countries, we have been able to keep the pandemic relatively well-contained, and the economy is on its way to recovery.
The transactions suggest that foreign investors remain confident in Singapore’s long term economic outlook and are interested in good quality freehold assets in good locations.
I believe that with further improvements in the reopening of Singapore’s economy and progress in the vaccine rollout, investors’ sentiments are also turning more positive.
One, in particular, is having an immediate effect – the new measures allowing up to 75% of employees (from 50%) at the workplace at any one time as of 5 April have seen a marked increase in people in the CBD and economic activities forward.
Currently, the government is also actively trying to engage other countries in discussing the potential of opening doors for travel bubbles.
Singapore property investment is expected to return to pre-Covid levels in the coming quarters. Where are the bright spots? Challenges?
Bright Spots
We believe commercial assets remain attractive as more tech giants set up bases in Singapore, coupled with landlords in the CDB looking leverage on the URA Incentive Scheme to redevelop/reposition assets in strategic areas.
Industrial assets are also popular as the industrial sector had been the most resilient sector during Covid; in particular, business parks, logistics spaces, and data centres benefit most from increased R&D, e-commerce adoption, and increased technology adoption and data broadband usage, respectively.
Challenges
As we gradually recover, some challenges remain.
Specific segments such as factories could see a surge in supply this year, at 2.0 million sqm (GFA), delays in completions in 2020 have worsened this. This is more than double the 10-year historical annual average supply of around 0.9 million sqm.
With travelling still being restricted, the hotel and retail segments may not recover as quickly in the near term.
Overall outlook for the coming quarters?
Over the next few quarters, we expect sentiments to continue improving along with the progress of the vaccine rollout and as the economy reopens further.
Coupled with Singapore’s safe-haven status, pro-business environment and economic growth, it should support higher investment sales in 2021.
We forecast investment sales to grow 20% YOY in 2021 to just shy of $30 billion worth of transactions.
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