SINGAPORE, 28 March 2022 –2021 marked a stellar year where investment volume in Singapore rose to nearly $24.6bn in 2021, an 87% rebound from the previous year, albeit still 19% lower than pre-pandemic levels in 2019. While deals last year were driven largely by the residential segment (60%), commercial deals accounted for 25% totaling $6.2bn, an increase of 9% year on year. Overseas capital sources largely drove the commercial market recovery, whose acquisitions are largely made up of office assets.
CEO of EDMUND TIE, Mr. Desmond Sim said: “Singapore has emerged as an attractive safe haven for the capital markets, which is reinforced by its better-than-expected economic growth last year. URA’s latest prohibition on commercial strata subdivisions in areas within the Central Area is unlikely to result in any drastic impact to market sentiments as the profile of the investors of commercial developments in recent times still remain mainly institutional with a mid- to long-term investment horizon.”
As at writing, the first three months of the year have witnessed nearly $9.2bn worth of deals transacted, extending the $7.2bn recorded in the final quarter of last year. The commercial sector alone chalked up $6.2bn worth of deals, which constituted a notable 67% of the total deals this year, including the proposed acquisition of Jem (68.2% remaining interest) for $2.08bn, the sale of 79 Robinson Road ($1.26bn), collective sale of Tanglin Shopping Centre ($868mn), Cross Street Exchange ($810.8mn), PIL Building ($323.8mn) and 55 Market Street ($287mn).
The profiles of these new asset owners are established institutional investors who have made their investments either with a Core Plus strategy or for redevelopment. Notably, these transactions will be exempt from the recently revised Additional Buyer Stamp Duty or ABSD rates. Mr. Sim commented: “Commercial redevelopment sites of a generous site coverage will prove to have an advantage as it allows these investors to design sizeable floor plate footprints coupled with quality specifications to meet the needs of the new pandemic normal.”
Commenting on the increased ABSD rate, Mr. Sim said: “The increased ABSD rates are likely to reduce developers’ interest for larger residential sites due to the increased risk, leading to a spill-over to non-residential investments like the commercial sector. With the popularity of mixed-use development, commercial-zoned sites are garnering more attention from investors for that fact that the residential components for such sites are not subjected to ABSD or Qualifying Certificate (QC) rules.”
The key drivers of office demand in the last two years have been the technology and finance sectors. While technology demand growth could slow temporarily in the months ahead on the back of supply chain constraints/disruptions and the Chinese regulatory clampdown, we remain optimistic on the finance sector, especially the wealth management industry.
EDMUND TIE’s Head of Research and Consulting, Mr. Lam Chern Woon commented: “With the recovery of prime office rents beginning to take hold, this has assuaged investors of positive rental reversions and buffers for underwriting. The economic recovery last year, improving business sentiment, coupled with a tight supply pipeline and flight to quality by occupiers have led prime office rents in the downtown to bottom out by the third quarter of last year.”
The redevelopment of older office buildings in the CBD has resulted in displaced tenants looking for alternative spaces in the near term and supported leasing activities. We see limited supply pressure in the downtown; commitment levels are high for CapitaSpring while longer-term pressure is mitigated as redevelopment projects like AXA Tower, Maxwell House and Fuji Xerox have residential or hospitality components under the CBD Incentive Scheme.
Mr. Lam commented: “The fresh easing of social, workplace, event and border restrictions by Prime Minister Lee last week will undoubtedly instill greater confidence in the commercial sector as we progress on the path towards pre-pandemic normalcy. We are optimistic that overall investment sales volume in Singapore could exceed $26bn this year from 2021’s $24.6bn. We expect commercial investments, especially in the downtown, to surprise on the upside and are likely to feature more than the residential as the top investment asset class.”
For further information, please contact:
Chan Yee Yin (Ms)
Head, Corporate Communications
O: + 65 6393 2369
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