Singapore Real Estate Investment Fell 50% to $2.9B in Q2

Investment in Singapore real estate plunged to a two-year low in the second quarter, falling S$3.8 billion ($2.86 billion) after dropping 50 percent from the S$7.6 billion recorded a year ago as big ticket deals dried up.

Last quarter’s total slid 5.7 percent when compared to the S$4.03 billion seen in the first three months of the year, marking the stingiest three month period since October through December 2020, according to a report by Colliers on Monday.

A sharp drop in major commercial deals dragged down the second quarter total and outweighed a boost from government land sales and large-scale acquisitions in the industrial sector, such as Hillhouse Capital’s purchase of a S$313.5 million warehouse portfolio from ESR-Logos REIT announced last month.

“Going forward, limited cap rate expansion and price expectation gaps might continue to impede deals. Nevertheless, with most of the known risks already priced in, investment volume is more likely to surprise on the upside,” said Catherine He, director and research head for Singapore at the property agency.

Sheds and Beds Dominate

Colliers said the uncertain macroeconomic environment and high borrowing costs have made larger assets “less digestible” to investors, although demand for core properties is likely to remain strong due to rising rents.

Real estate investments totaled S$7.83 billion in the first half, down 58 percent from the S$18.6 billion worth of deals posted in the same six-month period last year.

“Driven by refinancing challenges, pressure from the balance sheet, and the motivation to sell before any price corrections, the pace of asset sales should pick up in the second half of the year,” said Tang Wei Leng, the agency’s head of capital markets and investment services in Singapore.

By sector, residential investments topped the list with S$1.6 billion worth of assets changing hands. Those housing deals accounted for nearly half of total investment sales in the second quarter. Despite a boost from government land sales worth about S$700 million, residential investments last quarter were just half of the S$3.27 billion recorded in the same period last year.

Among the biggest residential deals were the Lentor Garden site won by GuocoLand and its Singapore cousins at Hong Leong Holdings for S$487 million in a public tender in April, as well as a set of three good class bungalows on Nassim Road purchased by a rich Indonesian family for S$207 million that same month.

Helped along by the ESR-Logos REIT sale, industrial deals during the quarter totalled S$868 million, which was more than triple the S$270 million seen during the same period a year ago. In addition to the ESR-Logos REIT deal, CapitaLand Ascendas REIT acquired The Shugart business park in the One North district in May through a sale-leaseback deal with data storage firm Seagate.

Commercial Disappoints

Despite a slowdown in the broader commercial segment, cashed-up private investors fueled the shophouse segment to S$576 million in transactions last quarter, which was up 62 percent year on year.

That increase failed to offset a broader pause in the sector, with deals for offices, malls and hotels falling 71 percent to S$617 million in the second quarter from S$2.1 billion a year ago.

Leading the commercial sector was a set of strata office sales in the Solitaire on Cecil project by TE Capital and LaSalle Investment Management, which sold all 15 strata-titled office floors during the first half of the year.

Full-Year to Hit Lowest Since 2020

Opportunistic investors and private wealth are likely to be the primary drivers of investment for the rest of the year as Colliers predicts a full-year deal volume of S$24.7 billion, which would mark a 14.8 percent drop from last year’s total of S$29 billion, and potentially notch the city-state’s lowest total in three years.

“With Singapore continuing to draw in family offices and long-term capital, investment volume in the next few quarters will continue to be driven by private wealth, as well as buyers not requiring leverage as borrowing costs remain high,” the property agency said.