Strongest first quarter results in nine years for Singapore private office investment sales : JLL
JLL’s research shows that some SGD 4.99 billion worth of real estate investment deals were sealed in the first three months of 2017. While this was 40.9% lower than the SGD 8.44 billion accumulated three months ago, it was 67.4% higher than the SGD 2.98 billion managed a year ago. Market activity was dominated by the private sector with the SGD 4.47 billion concluded accounting for almost 90% of all of 1Q17’s total sales value.
Ms Tay Huey Ying, Head of Research & Consultancy at JLL Singapore explained, “The engine of growth for Singapore’s private investment sales market in 1Q17 was the office sector which took the lion’s share at 47.5%. In all, investors injected about SGD 2.12 billion worth of capital into the sector in 1Q17. This not only represented a 60.6% quarter-on-quarter (q-o-q) jump from the preceding quarter’s SGD 1.32 billion, it was also the highest first quarter private sector office investment sales value amassed since 2008 when two billion-dollar deals involving One George Street and Singapore Power Building propelled sales to SGD 3.41 billion.”
The top two office deals in 1Q17 were entity sales. The entire interest in the holding company of PwC Building was sold to an indirect subsidiary of Manulife Financial Corporation for SGD 760.60 million, and the entire interest in Plaza Ventures Pte Ltd, the registered owner and developer of GSH Plaza, was sold to Hong Kong-listed Fullshare Holdings for SGD 725.21 million.
In fact, the office sector was the star performer of the private sector investment sales in the commencing quarter of 2017. While all sectors posted year-on-year (y-o-y) growth in sales value, it is the only sector that posted q-o-q growth in 1Q17. Private sales of residential properties worth SGD 5 million and above apiece fell 35.3% q-o-q to SGD 1.69 billion although this still placed the sector on the second spot on the quarter’s private sector investment sales chart with a 37.7% market share. Private sales of SGD 5-million and above retail and industrial properties slipped more than 50% q-o-q and each accounted for less than 10% of the quarter’s private sector investment sales. Sales of hotel and mixed-use properties remained muted, with no known major transactions in 1Q17.
Mr Greg Hyland, Head of Capital Markets for JLL Singapore is optimistic about the prospects for the office investment sales market in 2017. He opined, “Investors’ confidence in Singapore’s office property market continues to be on the rise, underpinned by the city state’s sound economic fundamentals. They are acutely aware that the window of opportunity to acquire available assets at an attractive point in the cycle is fast closing as the office leasing market is already showing signs of stability at the prime CBD end.”
Ms Tay shares Mr Hyland’s optimism. She reasoned, “The SGD 2.12 billion amassed in the private office sector in the first three months of 2017 already accounted for almost a third of the whole of 2016’s sales of SGD 6.49 billion. Taking into consideration recently concluded deals such as that for One George Street, as well as sizeable assets available in the market including Asia Square Tower 2, there is potential for 2017 full-year sales of private office assets to surpass that of 2016’s.”
JLL is equally upbeat about 2017’s prospects for the retail and residential sectors. The successful sale of Jurong Point to Mercatus Co-operative for SGD 2.20 billion could propel the full-year sales value of retail properties, challenging the SGD 3.35 billion concluded in 2013.
Sales of residential properties, too, is forecast to stay elevated in spite of the recently-introduced Additional Conveyance Duty putting a damper on bulk deals. The combination of upbeat buyer sentiment and attractive incentive packages offered by developers for high-end properties could prop up the strata sales market. Developers’ growing appetite for collective sales sites in the face of their depleting land bank amid low State land supply could also lend support to investment sales although the materialisation of deals will hinge on the matching of price expectations.
Ms Tay concludes, “Singapore property investment sales is poised to have a strong run in 2017. Macro-economic and geopolitical uncertainties are working to Singapore’s favour as investors look to Singapore as a safe haven to park their capital. Investors are also optimistic that Singapore’s property market is close to the bottom and are confident that entering the market now will position them well to ride on the impending growth. Barring unforeseen circumstances, private sector investment sales stand a good chance to outshine 2016. All eyes will now be on the upcoming 2H2017 GLS programme for clue on how 2017 will pan out for the overall investment sales market. ”