Property investment sales up 49% in second quarter

Commercial deals made up 52% of S$6.7b total; Q2's two biggest office space deals generated nearly S$2b in sales

Thu, Jul 11, 2019

REAL estate investment sales surged 49 per cent quarter on quarter on the back of big-ticket office-sector deals.

The second quarter of the year recorded S$6.7 billion in real estate investment sales, with 52 per cent of that figure coming from commercial deals, said a Cushman & Wakefield (C&W) report.

The quarter's two largest office-space deals alone generated just under S$2 billion in sales.

One is the purchase of Oxley Holdings' Chevron House by AEW for S$1 billion. In the other deal, the South Korean National Pension Service bought a S$982.5 million half-stake in Frasers Tower after Frasers Commercial Trust declined to exercise its right of first refusal, as the deal would not be yield-accretive for its unitholders.

Residential and industrial sales amounted to S$1.7 billion and S$0.5 billion respectively, bringing the total volume in H1 2019 to S$11.2 billion.

C&W has projected an FY 2019 investment of S$25 billion.

The commercial sector was enlivened by the Urban Redevelopment Authority's 2019 Draft Master Plan to rejuvenate the Central Business District (CBD), said C&W head of capital markets Shaun Poh.

Some owners of smaller adjacent plots are "contemplating the possibility of joining forces" to qualify for the new CBD Incentive Scheme, he said.

C&W Singapore and South-east Asia head of research Christine Li said that competition for CBD assets may nudge investors into the decentralised office market.

Metro Holdings and Evia Real Estate, for example, bought suburban-office properties at 7 and 9 Tampines Grande for S$395 million this quarter.

Ms Li expects the commercial sector to keep its momentum, with more big-ticket deals already lined up.

Gaw Capital Partners and Allianz Real Estate are in advanced negotiations to buy DUO Tower and DUO Galleria for about S$1.6 billion; Arch Capital Management is carrying out due diligence for a roughly S$210 million Anson House purchase.

This quarter, the retail sector featured a S$250 million Mitsubishi Estate and CLSA acquisition of Chinatown Point Mall, and Frasers Centrepoint Trust bought a S$440.6 million one-third stake in Waterway Point from its sponsor, Frasers Property.

In the industrial sector, CapitaLand divested 11 StorHub warehouses for S$166.4 million, and ESR-REIT bought a 49-per-cent stake in Poh Tiong Choon Logistics Hub for S$110.3 million.

Ms Li said: "The favourable interest rate environment with potential Fed rate cuts in the coming quarters should continue to boost interest in real estate investment.

"Prices are riding on the expectation that yield-hungry investors will be diverted from the bond market to the commercial property market due to the widening yield spread."