According to Cushman & Wakefield, Q1 2022 investment volume amounted to $6.1 billion, marking a 17.5% qoq drop over Q4 2021. However, on a yearly basis, investment volume during the first quarter of this year registered a substantial increase of almost 40% as compared to that in Q1 2021, driven by robust activities in both the residential and commercial markets.
Figure 1: Investment Sales Volume
Being accounted for almost half of Q1 2022’s investment sales, total residential investment volume rose from $2.8b clocked in during the last quarter of 2021 to $3.0b registered in Q1 2022, driven mainly by the conclusion of government land sales (GLS) deals. There was no residential GLS tender closing during Q4 2021 while four residential GLS sites were sold in Q1 2022 for around $2.0b, comprising Lentor Hills Road (Parcel A) with top bid of $586.6 million (m) or $1,060 per sq ft per plot ratio (psf ppr), Jalan Tembusu ($768m or $1,302 psf ppr), Dairy Farm Walk ($347m or $980 psf ppr) and Bukit Batok West Avenue 8 executive condominium (EC) site ($266m or $662 psf ppr). Most of these sites attracted keen interests from developers despite the recently implemented cooling measures as unsold inventory stayed at record low of only 14,333 units as at end 2021.
“Private residential investment sales fell by more than 60% as activities in the private residential investment market slowed down in Q1 2022. Developers are more selective and cautious following the latest round of cooling measures and higher construction costs and development risks. Hence, the residential collective sale market mainly witnessed the sales of small sites such as Gloria Mansion ($70.3m), Vicenta Lodge ($27.2m) and Baode Building ($27m) during the first quarter of this year,” said Wong Xian Yang, Head of Research, Singapore at Cushman & Wakefield. “However, we expect developers’ land acquisition activities to pick up in subsequent quarters as unsold stock continues to run low and a clearer picture of cooling measures’ impact on home buying demand emerges.”
Figure 2: Investment Sales Volume by Sector
“There was significant pick-up in commercial investment sales during the quarter with Q1 2022’s volumes surging to $2.6b – around 19% higher than sales volumes registered in the previous quarter,” said Shaun Poh, Executive Director of Capital Markets at Cushman & Wakefield. “This could be attributed to the conclusion of several large commercial deals in Q1 2022, which includes the sale of 55 Market Street, Cross Street Exchange and Tanglin Shopping Centre.”
The quarter’s second largest commercial investment deal involved the divestment of Cross Street Exchange by Frasers Logistics and Commercial Trust for $810.8m to PAG. The price tag represents a 28.3% premium to Cross Street Exchange's book value of $632m as of 30 September 2021. Also, 55 Market Street was recently sold to Kajima unit by AEW for nearly $287m.
“These transactions have indicated investors’ strong confidence and preference for quality assets in Singapore’s CBD amid the expected strong growth for the office market this year,” added Shaun. “Investment sales momentum is expected to stay robust this year amid stable economic growth and the gradual resumption of various economic activities.”
Investment sales volumes could surge in the upcoming quarter as various mega-deals are expected to be completed by then. One of the largest deals is Lendlease Global Commercial REIT’s (LREIT)’s acquisition of the remaining interest in Jem Mall at an agreed property value of $2.08b. LREIT currently indirectly holds a 31.8% stake in the mall. Another large deal projected to be finalized in Q2 2022 is the acquisition of 79 Robinson Road - a Grade A office building with remaining land tenure of around 45 years by CICT and CapitaLand Open End Real Estate Fund for almost $1.3b. Other deals include the merger between ARA LOGOS Logistics Trust and ESR-REIT as well as the potential sale of Golden Mile Complex via the collective sale market. Far East Organization and Perennial Holdings have made a $700m offer for the iconic development at Beach Road which was put up for collective sale in 2021 at a reserve price of $800m.