SINGAPORE, 05 April 2024- According to Cushman & Wakefield’s latest Marketbeat report, Investment volumes are up by 20.9% yoy. In Q1 2024, investment volume was led by the residential ($1.7b) sector, followed by commercial ($1.3b) and hospitality ($0.6b) sectors.
Due to rising investor confidence on the back of strong travel recovery, both retail and hospitality sectors registered higher transaction volumes. The largest retail transaction was the sale of The Seletar Mall for $550 million (m), which was also the biggest investment deal sealed by quantum. Allgreen Properties’ acquisition of The Seletar Mall was seen to be a value-add opportunity for further enhancements to the asset. For the hospitality sector, investment volume was driven by the sales of Hotel G ($238.0m) and Capri by Fraser, Changi City ($170.0 m). Island-wide hotel revenue per available room (RevPAR) has been steadily increasing to $224.27 in 2023 compared to $191.96 in 2019.
With brighter economic prospects in 2024 and growing confidence that interest rates have peaked, investment activity is expected to gain momentum over the next few quarters. Given current investment momentum, we are sanguine that total investment sales could surpass $25.0b this year, compared to $19.2b in 2023.
INVESTMENT SALES VOLUME
Source: Cushman & Wakefield
Figure 1: Investment Sales Volume
INVESTMENT SALES VOLUME BY SECTOR
Figure 2: Investment Sales Volume By Sector
Bite-sized Deals Continue to Transact
Shophouses continued to appeal to investors, such as high net-worth individuals, for wealth preservation and diversification due to their palatable quantum and potential for capital appreciation. Island wide shophouse total transaction volume rose 54.9% qoq to $169.1m in Q1 2024, based on caveats lodged as of 1 April 2024, though it declined 43.0% on a yoy basis.
The largest shophouse deal was reportedly the sale of three adjoining shophouses on Duxton Road for $47.5m (caveats not lodged for this transaction). Based on caveat data, a significant shophouse transaction was 223,225,227 Geylang Road for $18.7m. Notably, given its value-add potential, this Geylang Road shophouse divestment reaped a capital gain of about 82.0% or $8.0m since its acquisition less than 4 years ago.
“Investors remain keen on acquiring quality commercial assets as they continue to look for safe-haven assets. We anticipate healthy investor interest for small commercial buildings or CBD strata offices, CBD conservation shophouses, small freehold industrial sites, and hotels,” said Mr Shaun Poh, Executive Director, Head of Capital Markets at Cushman & Wakefield
More Investment Sales Opportunities Hospitality and Retail Sectors
Given resilient consumer spending and continued travel recovery, retail and hospitality assets have returned to investors’ radars. Retail and hospitality net yields remain higher (about 1% point higher) compared to office net yields, which is appealing to investors given current still-high interest rates. Potential retail and hospitality deals include Citadines Raffles Place, which is reportedly undergoing a sale process, as well as retail mall Liv@Changi and a freehold hotel at 12 Lorong 12 Geylang, both of which have been launched on the market.
While the residential collective sale market continues to face challenges into 2024, pockets of activities could still surface, especially for small to medium-sized sites as developers continue to seek out bite-sized opportunities to landbank.
Industrial Investment Interest Remains Steady
For example, a notable industrial transaction in Q1 2024 was BDx’s acquisition of their own data center (OneTen Paya Lebar) for about SGD 140 million, at an estimated net yield of 3.4%. The acquisition allows BDx the flexibility to asset enhance or redevelop the site in line with robust data center demand in Singapore.
"Industrial assets retain their appeal among investors owing to their relatively higher yields and favorable long-term outlook.” said Brenda Ong, Executive Director, Logistics & Industrial at Cushman & Wakefield.
