Why 2022 is still a robust year for Singapore property investment despite slowdown

The total investment volume so far this year is already 3% higher than 2021 levels. 

According to a Cushman and Wakefield report, Singapore's real estate market has attracted around $26.9b in investments in the first nine months of this year, which was already 3.0% higher than the total investment volumes registered for the whole of 2021.
 

"Given stronger headwinds arising from weaker global economic outlook coupled with high inflation / interest rate
pressure, sales momentum could be moderated in the upcoming quarter. Notwithstanding this, investment sales
volumes registered during Q1 – Q3 2022 already reached a three-year high. Also, capital values are projected to stay robust amid strong leasing markets with rents across various sectors continuing their upward trends," the report said.

Here’s more from Cushman and Wakefield:

The industrial investment market in Singapore still saw some activity as investors look for assets with a comfortable yield spread amid a rising interest rate environment. Industrial assets typically offer higher yields as compared to other asset classes due to their shorter leases, lower investors’ familiarity as well as various JTC’s regulations.

Notably, Ascendas REIT recently announced its acquisition of Philips Asean Pacific (APAC) Centre from Philips Electronics Singapore for $104.8 million. The first-year net property income (NPI) yield of the acquisition is estimated to be around 7.2% (pre-transaction costs). Upon completion of the transaction, Philips will enter a multi-year leaseback of more than two-thirds of the property’s gross floor area. 

Additionally, Ascendas REIT also purchased a cold storage facility at 1 Buroh Lane for $191.9m during the quarter at an estimated NPI yield of 7.0% (pre-transaction costs). Both of these two assets have a remaining lease balance of less than 30 years, which explained the higher yields achieved. 

Relatively Muted Commercial Sales 

The commercial investment sales market tumbled in Q3 2022 given the scarcity of quality commercial assets amid more challenging market conditions. Many property owners / long-term investors would prefer to keep the high-quality assets in their portfolio instead of divesting them, especially during such a volatile environment. 

One of the notable office deals during the quarter was the sale of level 8 Samsung Hub for $53.1m or $4,050 psf of strata area – same as the record unit price for an office floor in the 999-year leasehold building in the Raffles Place financial district when the 9th floor of the same development was sold last year. This indicated relatively strong liquidity for bite-sized commercial assets and reflects buyers’ confidence in the office market, especially when robust office demand seem to defy recession concerns.