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Slowdown in residential en bloc market may see commercial and industrial segments pick up the slack: Colliers

timothy.tay@edgeprop.sg

The latest property cooling measures will cause a “slowdown for the residential en bloc market in the near term”, says Tricia Song, Colliers International head of research for Singapore. Commercial and industrial property “could pick up the slack” for the rest of the year, she says.

Higher demand for the commercial and industrial segments will come from “healthy commercial properties deal pipelines and rising interest from real estate investment trusts and institutional investors for industrial assets”, Song adds.

Sales of industrial properties jumped 295% y-o-y to $797.4 million in 2Q2018, due to strong private investment sales which accounted for 95.7% of total sales volume in the industrial sector. Major deals included the sale of a 99% stake in Kingsland Data Centre for $295 million to Keppel DC REIT and Admirax for $106 million to BlackRock. “As industrial rents and prices are expected to bottom out and stabilise, we notice a growing institutional interest to acquire more industrial spaces, especially in niche sectors such as data centres, hi-spec facilities and modern ramp-up logistics buildings,” says Song.

In light of the cooling measures, shophouses are also emerging as an alternative asset class among high net worth individuals, property funds, and investment companies. Transactions in shophouses that are worth more than $5 million, grew 13.4% y-o-y to $305.7 million last quarter. This brought total shophouse transactions to $784.3 million in 1H2018, surpassing full-year shophouse investment sales from 2014 to 2017.

Overall, Colliers forecasts that Singapore’s property investment sales in 2018 will match the $40 billion recorded last year. Before the latest cooling measures were implemented, Colliers had predicted a 15% y-o-y rise in investment sales to $46 billion this year.

 

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