Slow start to 2023 for real estate investment sales amid market uncertainties: Knight Frank

Worldwide property firm Knight Frank reports that Singapore real estate investments got off to a “slow-moving start” in 2023, with just $4.2 billion of investment sales filed in 1Q2023. This was a significant decline of 61% y-o-y contrasted to 1Q2022’s $10.8 billion

While the industrial market was mostly peaceful in 1Q2023, the sale of 39 Robinson Road to Yangzijiang Shipbuilding for $399 million last week pushed total sales in the field to $1.9 billion. An additional significant transaction was Frasers Centrepoint Trust Fund and Frasers Property’s purchase of a 50% risk in Nex for $652.5 million.

Nonetheless, she acknowledges that the en bloc environment continues to be challenging, given the gulf in price requirements between sellers and developers. From 2021 until currently, Chia notes that cumulative sales have actually had an excellence rate of around 33%. In comparison, en bloc sales had a success rate of 63% throughout the duration of 2017 to 2018.

At the same time, the commercial industry found an increase in financial investment sales in 1Q2023, rising 62.8% q-o-q to $681.1 million. Knight Frank attributes this to the marketplace shifting emphasis while waiting on the potential repricing of assets in the commercial field. Significant commercial bargains past quarter consist of the acquisition of four Cycle & Carriage real estates by M&G Real Estate at roughly $333 million, as well as the disposal of 12 and 31 Tannery Lane by Ho Bee Land for $115 million.

In terms of market expectation, Knight Frank predicts the rate of investment venture in Singapore “to become worse just before it recovers” amid macroeconomic uncertainties plus volatility in the international financial sector. “Financing has become extra tough for buyers, investors, developers and banks, and will continue to be so up until there are visible signs of the international economy and financial conditions securing,” the consultancy states. Investors are anticipated to continue to be mindful as they keep an eye on for indications of repricing prior to selecting their next move.

“Even if proprietors attain an 80% contract to sell collectively, this does not guarantee a successful sale. Ultimately, the key for the collective sales components to work in the current cycle lies with owners adopting practical assumptions on rate in order to motivate the interest of developers, and for property developers to value that replacing expenses for owners have raised significantly,” says Chia.

Household deals amounted to $1.6 billion throughout the very first quarter of 2023, including the collective sales for Meyer Park, Bagnall Court and Holland Tower that amounted to some $583.8 million.

To that end, Knight Frank has indeed reduced its estimates for full-year investment sales from a range between $22 billion and $25 billion to a range between $20 billion and $22 billion.

Tembusu Grand floor plan

It is also the most affordable quarterly amount ever since 2Q2020, when the state imposed the “circuit breaker” measures at the height of the pandemic, notes Daniel Ding, head of capital markets (land & structure, global property) at Knight Frank Singapore.

The sale of Holland Tower is the first effective property en bloc purchase in the Core Central Region (CCR) because property cooling down procedures were enforced in December 2021. This indicates “an inceptive return” of interest for top location project locations upon the reopening of China, notices Chia Mein Mein, head of capital markets (land & collective sale) at Knight Frank Singapore.

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