Real estate investments up 75% q-o-q in 3Q2023, bolstered by GLS tenders: Knight Frank
The firm has solidified its full-year estimates for investment sales, cutting estimates from between $20 billion to $22 billion to in between $18 billion to $20 billion.
Commercial estate packages increased in 3Q2023, climbing 27.4% q-o-q and 23.3% y-o-y to hit $1.5 billion. The higher value adheres to the sale of Changi City Point by Frasers Centrepoint Trust for $338 million in August, with the shopping center apparently purchased by the Zhao family group from mainland China. Additionally, the cumulative sale of Far East Shopping Center for $908 million to Glory Property Developments last month also reinforced industrial investment market value, in addition to the sale of the mixed-use, business and residential GLS area at Tampines Avenue 11 for $1.2 billion.
“As a result of the present high rate of interest expense, purchasers find themselves needing to move up the danger curve by including worth to their financial investments to acquire higher sustainable revenues, and this features acquisitions for growth and redevelopment,” comments Daniel Ding, head of capital markets (land and building, global real estate) at Knight Frank Singapore.
The combined sales market likewise continued to face headwinds amid the unsure market expectation. “The broadening gulf in expectations between proprietors and developers remained the biggest obstacle, worsened by improving expenses, rate of interest and the excessive increases in ABSD prices, done in a climate of financial cynicism,” Knight Frank mentions in its record. In July, Wing Tai announced its withdrawal from the sale of Holland Tower, after the deal was made at $76.3 million in March this year.
Singapore real estate financial investment activity viewed an increase in 3Q2023, registering a rise of 74.8% q-o-q to appear at $6.9 billion, according to an October study record by Knight Frank. The amount likewise represents a 19.4% improvement y-o-y. This marks the initial quarterly growth after five continuous quarters of reduction since 1Q2022.
Some $4.1 billion (over 60%) of the transacted worth originated from Government Land Sale (GLS) locations that were awarded in the pas quarter, including areas at Tampines Avenue 11, Marina Gardens Lane and Jalan Tembusu.
Looking ahead, Knight Frank anticipates slower financial investment event for the rest of the year provided the prevailing belief and challenges in the estate market. “In the upcoming months, the capital markets area will certainly be characterised by financiers on the hunt for assets being mostly focused on bring in significance to the real estates to accomplish greater returns. This is to warrant the higher borrowing costs included with the procurement of the property,” the record adds.
Alternatively, industrial deal value plunged to $252.2 million in 3Q2023, in which Knight Frank notes is the lowest quarterly amount recorded as the $174 million registered in 2Q2020 throughout the circuit breaker period.
Chia Mein Mein, head of funding markets (land and collective sale) at Knight Frank Singapore, adds that climbing expenses have triggered developers to turn towards GLS areas. Nonetheless, notwithstanding plots in prime locations, she notes that builders’ appetites have actually reduced, with a lot fewer participants and more conventional bids submitted in latest GLS tender exercises.
Residential deals composed $3.3 billion of assets value in 3Q2023, mainly pushed by the award of five non commercial GLS tenders. This stands for a rise of 93.5% q-o-q, but a decline of 12% y-o-y. Additionally, private homes registered a decline in sales activity, which Knight Frank attributes to the increase in Additional Buyer’s Stamp Duty (ABSD) rates that happened in April.