Investment sales of property reach $28.7b this year

Investment sales of property - which refer to transactions of $10 million and above - have fallen to about $6.9 billion so far this quarter (up to Dec 11), from the $9.3 billion in Q3.

The slowdown came amid a halving in deals originating from the private sector to $3.7 billion so far in Q4 from $7.2 billion the previous quarter.

The weak global economy and a still-wide bid-ask gap remained key reasons for the tepid investment activities in the private sector.

Big-ticket deals originating from the public sector - predominantly Government Land Sales (GLS) - climbed to $3.2 billion in the Oct 1-Dec 11 period from $2.2 billion in Q3.

To replenish their land banks, local and even foreign developers contested aggressively at GLS tenders. In particular, riding on the current buoyant sales market for executive condos (ECs), strata offices, shops and medical suites, record prices were set for some sites slated for such use.

Including outstanding state tenders, caveats for other transactions which have yet to be lodged and the expected sale of 79 Anson Road, Q4's final tally could hit $7.6 billion.

Year-to-date (up to Dec 11), $28.7 billion of investment sales deals have been transacted, though 2012 could end at around $29.5 billion, it estimated. That would be slightly shy of the $30.1 billion last year and $32 billion in 2010.

The en bloc sale market has been anaemic this year, with 24 deals totalling just under $2 billion, down from 51 transactions at $3.2 billion last year.

Although Savills defines investment sales as deals of at least $10 million, it includes transactions below this threshold for GLS sites, residential en bloc sites and acquisitions by real estate investment trusts.

Of the $28.7 billion transacted year-to-date, the residential sector continued to make up the lion's share - of about 45 per cent amounting to $13.1 billion. Including today's tender closing of a Sembawang EC plot and caveats for other residential transactions that will be lodged by Dec 31, the full-year figure could be close to 2011's $13.5 billion.

Commercial (office and retail) property deals have reached $7.5 billion year-to-date, down from $8.2 billion in 2011.

Private-sector office transactions declined from $6.2 billion in 2011 to $4.9 billion so far this year. Savills attributes this to global economic uncertainty, a moderation in office leasing and the buyer-seller price gap. DBS' purchase of a 30 per cent stake in Marina Bay Financial Centre Tower 3 at $1.035 billion has been the biggest office deal this year.

Retail property deals in the private sector doubled from $1.1 billion in 2011 to $2.3 billion year-to-date, buoyed by the sale of several shopping centres, including a half stake in nex in Serangoon for $825 million and the $519 million sale of Compass Point.

Investment sales of hospitality assets in private and public (GLS) segments combined jumped from $1.6 billion in 2011 to $3.8 billion so far this year, thanks to the flotation of Far East Hospitality Trust. This involved the sale of seven hotels and four serviced residences worth $2.1 billion to the trust by its sponsors.

Industrial property deals slipped from $4 billion in 2011 to $3.4 billion year-to-date, amid a decline in the public sector's contribution. The fall is from a high base in 2011 which saw the second phase of JTC's divestment, along with shorter-tenure GLS sites.

Source: Business Times –13 December 2012