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Residential sector drove investment sales in Q3 2021 amid returning investment interest in retail properties

Siew Wong • 13/10/2021

- Q3 2021 overall real estate investment volume amounted to nearly
$8.0 b – up by 22% qoq
- Residential sector led investment sales in Q3 2021 at $3.8 b, boosted by public
land sales tenders
- Retail investment sales surged by nearly five-fold to around $0.6 b during the quarter
- Activities in the investment sales market is projected to remain healthy, amid the economic recovery this year and a stable economic growth outlook in 2022

Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm has today published its latest Investment Market Beat research report, which tracks the performance of the real estate investment sales market in Q3 2021 and the market outlook ahead.

Overall investment sales surged 22% qoq in Q3, boosted by residential sector
The Q3 2021 investment volume amounted to nearly $8.0 billion (b), clocking a 22% qoq growth over Q2 2021. The increase was mainly led by growth in residential transaction values as well as the sales of two mixed-used sites (Jalan Anak Bukit and Marina View) via the Government Land Sales (GLS) programme for more than one billion dollars each. This took the overall investment sales volume to $18.8 b in the first nine months of 2021, representing nearly 80% of the sales registered in 2020.

Residential investment sales made up about 47.5% of the total investment volume in Q3 2021 at around $3.8 b – which was up by 28% from the $3.0 b transacted in the previous quarter. Both the public and private residential investment sales booked a strong performance during the quarter. There were four residential GLS sites sold in Q3 2021, comprising Lentor Central with top bid of $784 million (m) or $1,204 per sq ft per plot ratio (psf ppr), Slim Barrack Rise Parcel A ($320m or $1,246 psf ppr), Slim Barrack Rise Parcel B ($162m or $1,210 psf ppr) and Tampines Street 62 executive condominium (EC) site ($422m or $659 psf ppr). All these sites were keenly contested with numbers of bidders ranging between nine and 10 participants.

Wong Xian Yang (黄显洋), Head of Research, Singapore at Cushman & Wakefield, said, “The healthy public land tender bids reflected developers’ hunger for land amid an upbeat market when prices are rising, and unsold inventory are fast-depleting. Meanwhile, private residential investment sales clocked in $2.2 b during Q3 2021, up from $1.8 b seen in the preceding quarter due to strong sales activities in the high-end apartments, landed market as well as an uptick in en bloc sales.”

Hong Kong-listed Far East Consortium International announced on 17 September 2021 that it has sold the freehold 34-unit 21 Anderson for $213 million to Kheng Leong Group. The $213 million purchase price translates to $2,490 psf, based on the gross floor area (GFA) of 85,552 sf for the building. Also transacted in the same month, freehold development Flynn Park in Pasir Panjang was sold en bloc to a joint venture between Hoi Hup Realty and Sunway Developments. The sale price works out to $371 million or $1,355 psf ppr, which exceeds the $365 million reserve price, making it the largest collective sale site sold so far this year.

Retail assets finding favour among investors
Retail investment sales surged by nearly five-fold in Q3 2021 to register around $0.6 b worth of deals, after dipping in the previous quarter. Boosting 3Q21’s retail property sales was the conclusion of two mega deals (worth more than $100 million apiece). The larger of the two deals was the acquisition of 31.8% stake in Jem for $337million by Lendlease Global Commercial REIT. The quarter’s second largest retail investment deal also involved the sale of a suburban retail mall - Le Quest Mall in Bukit Batok to Firmus Capital for $139 million. Firmus is said to be positioning the suburban mall as “last-mile fulfilment hub for retail as well as food and beverage companies offering delivery and click-and-collect services” amid the pandemic and the increased adoption of work-from-home arrangements.

Shaun Poh (傅子伟), Executive Director and Head of Capital Markets at Cushman & Wakefield, said, “Suburban malls that can cater to a heathy residential catchment and positioned for food deliveries as well as large-scale malls which can integrate both offline and online users’ experiences are still on the radar of investors. Amid the challenging retail scene due to the pandemic and e-commerce boom, investors can keep a lookout for short-term repricing opportunities in retail assets especially those in the CBD.”

Quality office space still very much in demand
Q3 2021 witnessed the sale of 61 Robinson Road by ARA Private Fund to Rivulets Investments – a home-grown private-equity fund management group for $422 million. The property is currently undergoing asset enhancement works, which would improve its net lettable area (NLA) from 133,221 sf to 141,958 sf. The buyer is said to be on target to achieving a net yield of at least 3% on a stabilised basis for the 61 Robinson acquisition as committed occupancy for the subject office space is now in the 60%-70% range.

The outlook for the Singapore office investment market remains positive, supported by recovery in the leasing market with CBD Grade A rents returning to growth at 0.5% qoq in Q2 2021 and continuing to rise in Q3 2021. Against the backdrop of tight supply and steady demand from technology and wealth management firms amid a robust economic rebound, CBD Grade A office rents are poised to grow further for the rest of Q4 2021 and 2022. Rising office rents, low interest rates and excess liquidity are fueling investment market activities and office prices, which are set to rise further over the next few years.

Outlook
Cushman & Wakefield Research expects activities in the investment sales market is to remain healthy, amid the economic recovery this year and a stable economic growth outlook in 2022. In particular, office and industrial assets remain as investors’ hot favourites, fuelled by a chase for resilient asset classes.

Mr. Poh added, “Long-term investors are looking beyond the pandemic with strong confidence in Singapore’s sound economic fundamentals. For example, IOI Properties' huge capital outlay committed for the Marina View site has showed the developer’s belief of a stable future in the city-state. Developers’ appetite for private residential development land is likely to stay firm on the back of low unsold stock and healthy home buying demand.

“Additionally, office assets are expected to remain attractive given tight supply of quality stock while industrial properties could be in greater demand due to the sector’s resilience amid the pandemic, fuelled by the exponential growth in e-commerce, cold-chain, last-mile logistics and data centre services.”

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