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Property investment sector sees renewed energy on office segment

Ravi Philemon

Highlights of property investment sector performance in Q1 2019:

• With no major office en-bloc deals this quarter, preliminary investment sales volume eased by 31.4% q-o-q to S$3.59 billion in Q1 2019.

• The residential sector still accounted for majority of investment sales volume (30.4%), largely due to the award of two government land sale sites.

• Not surprisingly, the hotel sector accounted for 25.7% of total investment sales, at S$915.5 million.

• Retail investment volume soared by 129.4% q-o-q to S$640.73 million, on the back of two retail mall transactions – Liang Court was sold for S$400 million and Rivervale Mall was sold for S$230 million.

Mr Jeremy Lake, Managing Director, Capital Markets, CBRE commenting on the property investment sector said, “The office market continues to perform well and investors remain keen to acquire office assets in anticipation of further rental growth and capital appreciation.

While there were no major office building sales in Q1, there were a number of office strata sales including six floors in Suntec City for S$160 million. If interest rates are on pause for the rest of the year, investors could be energised further to enter the office investment market. It is likely that we will see a few notable office deals in Q2 which will shore up overall investment volume for 2019.”

Highlights of Southeast Asia investor intention survey 2019:

• Out of the cross-border respondents interested in investing in Southeast Asia (SEA), there is a growing proportion (40%) looking to shifting their geographical focus to other regional cities*. Meanwhile, there is stronger investor interest in HCMC (23%) and Manila (10%).
* Other regional cities exclude Bangkok, Hanoi, HCMC, Jakarta, Kuala Lumpur, Manila and Singapore. 

• Increasingly, investors are on the hunt for higher risk-adjusted returns. Hence, a high proportion of the surveyed investors (64%) expressed their motivation to look for assets with strong rental value growth in SEA cities driven by solid economic fundamentals. At the same time, investors are also attracted to the emerging markets in SEA that offer a wider range of products with higher initial yields.  Additionally, it is interesting to note that investors’ appetite for alternative assets is growing, of which retirement living/senior housing and real estate debt instruments were voted the top two attractive alternative sectors.

• While investors have indicated that they intend to ramp up purchasing activities in 2019, they are also mindful of high asset pricing and limited asset availability. As a result, a majority of investors (56%) are more inclined to look for small deals which are less than US$100 million.

Mr Desmond Sim, Head of Research, Singapore and Southeast Asia, CBRE commenting on the property investment sector said, “On the back of an encouraging year end investment volume, investment sales for the start of 2019 slowed albeit still at a healthy level.

While investors may have the intention to look for higher yielding markets or alternative sectors, we expect Singapore to continue witnessing transactions of right- commercial properties for the year ahead. Such continued growth in the occupier market adds more verve to Singapore’s investment market which typically favours a longer as well as a more stable and sustainable investment mandate.”

Property investment sector

Property investment sector sees buyers on the hunt for higher risk-adjusted returns.

CBRE’s South East Asia Investor Intentions Survey 2019 on the property investment sector showed that there is a growing proportion of investors who are shifting their geographical focus from key South East Asia (SEA) cities to other regional cities in SEA. Out of the cross-border respondents interested in SEA, 40% of foreign investors are looking at these regional cities. Also, there is stronger interest in HCMC and Manila.

Increasingly, investors are on the hunt for higher risk-adjusted returns from the property investment sector, said the survey. Other than looking for assets with strong rental value growth driven by solid economic fundamentals, the emerging markets in SEA also offer a wider range of products with higher initial yields. That said, investors’ appetite for alternatives is rising, where retirement living and real estate debt are the top two attractive alternative sectors.

The survey showed that buyers have indicated that they intend to ramp up purchasing activity in 2019. However they face obstacles such as high asset pricing and limited asset availability. This motivates a majority of investors (56%) to look for small deals which are less than $100 mil.

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