Foreign Investors Drive 21% Increase in Singapore Real Estate Deals 

The Singapore real estate market enjoyed its strongest start to a year in a decade thanks largely to foreign players driving a 21 percent annual increase in transactions of income-earning assets in the first quarter, according to MSCI.

Trades of rent-producing commercial, residential and industrial buildings in the city-state hit $2.3 billion last quarter, boosting Southeast Asia’s wealthiest city to its highest January through March tally in 10 years, with nearly half of the purchases being made by overseas buyers, based on the latest Asia Pacific Capital Trends report from the market data provider.

“Singapore has been a magnet for cross-border investors in 2022, with offshore capital responsible for deals across the office, retail and industrial sectors. But it is the office sector where activity has been concentrated the most,” said David Green-Morgan, RCA real estate research head for Asia Pacific. “For the first time ever, Singapore was the most traded CBD office market in Asia Pacific in a single quarter, overtaking the likes of Tokyo, Sydney and Seoul.”

As foreign investors made the city-state an outperformer in the region, the same report showed Singapore investors as the leading players in cross-border deals in Asia Pacific with buyers from the Lion City completing or committing to $7 billion in international deals through mid-May.

Mainland Market Locked-Down

The city’s strong start for 2022 ran counter to what most locations in Asia Pacific were experiencing, as total investment volume in the region fell by 11 percent year on year to reach just $40 billion in the first quarter. That performance marked the first decline in volume in the last six quarters.

Singapore also outperformed APAC key markets like mainland China which saw its first quarter investments drop by 14 percent to $9.8 billion – the largest volume in the region – as well as Japan whose deals worth $5.5 billion were 55 percent lower than the year ago tally.

With China’s most liquid real estate market, Shanghai, having been locked down for virtually all of April and May, the dropoff in mainland deals is expected to continue during the second quarter.

CBD Office Market in Focus

Among APAC’s five largest markets, Singapore’s 21 percent upswing trailed only Australia, which saw deal volume jump 22 percent year on year to reach $6.8 billion during the first quarter. South Korea ranked as the third most active market, with transaction values climbing 19 percent over 2021 the level.

PAG was the biggest investor in Singapore during the first three months of 2022, after the Hong Kong-based private equity firm snapped up the Cross Street Exchange from Frasers Logistics & Commercial Trust in January for S$810.8 million ($603 million), with that deal ranking as the region’s fifth largest single asset transaction and the biggest commercial deal in the city during the period.

Another major Singapore commitment by an overseas investor was Japan’s Kajima Corp picking up an office block at 55 Market Street from AEW for S$286.9 million in February.

For the 12 months ending 31 March, the value of properties traded in the Lion City nearly doubled to $9.9 billion, surpassing the 96 percent increase in Australia, which counted deals totalling $43.6 billion in the period, and Korea’s 33 percent rise to $41 billion in transactions.

RCA traced Singapore’s high investment activity this year to foreign players turning their focus to offices in the city-state’s central business district, with buyers from Japan, Germany, Hong Kong and the US snapping up five towers in the first three months.

That growing interest in desk space in the little red dot came as Singapore office landlords enjoyed improved occupancy rates and rising office rents in the city-state’s core locations during the first three months of the year.

GIC Leads Cross-Border Deals

As the Lion City welcomed a wave of foreign capital, Singaporean investors remained the top source of cross-border investments within the region, with sovereign wealth fund GIC leading the outbound wave after it backed ESR’s purchase of a RMB 4.4 billion (then $692 million Greater Shanghai industrial portfolio in February.

That same month, GIC also agreed to buy a third of a Japan hospitality portfolio worth around $1.3 billion from Seibu Holdings.

MSCI data showed Australia as the top target for Asian capital with Singapore’s Straits Trading and Hong Kong-based Link REIT among the players announcing acquisitions Down Under so far this year.

During the first quarter, Straits Real Estate bought a pair of office blocks in Melbourne for A$150 million (then $107 million) a few days after the Hong Kong-listed giant announced its purchase of a half stake in a portfolio of office assets in Sydney and Melbourne for A$596 million.