Slow start to 2023 for real estate investment sales amid market uncertainties: Knight Frank

Global property company Knight Frank reports that Singapore realty financial investments got off to a “slow beginning” in 2023, with just $4.2 billion of financial investment sales documented in 1Q2023. This was a marked decrease of 61% y-o-y compared to 1Q2022’s $10.8 billion

On the other hand, the commercial field saw an increase in investment sales in 1Q2023, rising 62.8% q-o-q to $681.1 million. Knight Frank attributes this to the marketplace shifting emphasis while waiting on the possible repricing of possessions in the business sector. Noteworthy industrial deals last quarter include the purchase of 4 Cycle & Carriage real estates by M&G Realty at roughly $333 million, along with the disposal of 12 and 31 Tannery Lane by Ho Bee Land for $115 million.

Midtown Modern Tan Quee Lan Street

The sale of Holland Tower is the initial effective domestic en bloc deal in the Core Central Region (CCR) since real estate cooling down measures were imposed in December 2021. This recommends “a nascent return” of interest for prime place project sites upon the reopening of China, notices Chia Mein Mein, head of funding markets (land & collective sale) at Knight Frank Singapore.

Nevertheless, she acknowledges that the en bloc atmosphere continues to be tough, given the gulf in rate expectations between vendors also developers. From 2021 until today, Chia keeps in mind that collective sales have had a success price of around 33%. In comparison, en bloc sales had a success price of 63% during the period of 2017 to 2018.

Non commercial trades totaled up to $1.6 billion throughout the very first quarter of 2023, including the cumulative sales for Meyer Park, Bagnall Court and Holland Tower that amounted to some $583.8 million.

“Even if proprietors attain an 80% contract to offer jointly, this does not guarantee a successful profit. Inevitably, the trick for the collective sales structure to operate in the current cycle sits with proprietors embracing practical expectations on cost in order to pique the interest of developers, and for developers to value that alternative costs for proprietors have raised significantly,” states Chia.

In regards to market outlook, Knight Frank predicts the pace of investment activity in Singapore “to worsen before it improves” amidst macroeconomic uncertainties and even volatility in the global banking field. “Funding has actually become extra difficult for buyers, investors, developers along with financial institutions, and will certainly stay so until there are noticeable indications of the global economic climate and financial problems stabilising,” the consultancy states. Investors are anticipated to remain careful as they monitor for indications of repricing before choosing their upcoming action.

It is also the most affordable quarterly amount ever since 2Q2020, when the govt established the “circuit breaker” measures at the height of the pandemic, mentions Daniel Ding, head of resources markets (land & structure, international real estate) at Knight Frank Singapore.

To that end, Knight Frank has indeed cut down its forecasts for full-year investment sales from a range between $22 billion and $25 billion to a range between $20 billion and $22 billion.

While the industrial market was mainly quiet in 1Q2023, the sale of 39 Robinson Road to Yangzijiang Shipbuilding for $399 million last week pressed overall sales in the market to $1.9 billion. An additional significant transaction was Frasers Centrepoint Trust and Frasers Property’s purchase of a 50% stake in Nex for $652.5 million.

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