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

in response to the market slowdown.

Investment sales in Singapore’s real estate market got off to a “slow start” in the first quarter of 2023, with only $4.2 billion worth of investments recorded. This marks a 61% decrease compared with 1Q2022, and the lowest quarterly total since 2Q2020 when the government had implemented circuit breaker measures in response to the pandemic.

Residential-level deals were steady, totaling to $1.6 billion, including the sale of collective properties such as Meyer Park, Bagnall Court and Holland Tower. Of particular note is the sale of Holland Tower which is the first successful collective sale of a residential property in the Core Central Region since 2021. This could signal the “nascent return” of interest for prime locations, according to Knight Frank Singapore’s Head of Capital Markets (Land & Collective Sale), Chia Mein Mein.

However, a large price gap between sellers and developers continues to challenge the en bloc environment, with the success rate of collective sales at around 33% from 2021-2023 compared to 63% in the period of 2017-2018. Chia goes on to explain that even with an agreement from sellers at 80%, it does not guarantee a successful sale, and that owners and developers must learn to accept realistic expectations on price to pique each other’s interest.

The commercial sector of Singapore’s real estate market is experiencing an overall lull, aside from the sale of 39 Robinson Road to Yangzijiang Shipbuilding for $399 million and Frasers Centrepoint Trust and Frasers Property’s acquisition of a 50% stake in Nex for $652.5 million.

Surprisingly, the industrial sector saw a 62.8% q-o-q raise in investment sales to $681.1 million, with notable deals including M&G Real Estate’s acquisition of four Cycle & Carriage properties for approximately $333 million, and the disposal of 12 and 31 Tannery Lane by Ho Bee Land for $115 million.

Though Knight Frank initially projected full year investment sales in the range of $22 billion to $25 billion, it has since revised its forecast to a range of $20 billion to $22 billion due to macroeconomic uncertainties and volatility in the global banking sector. Financing is becoming more difficult for buyers, investors, developers and banks, and investors are expected to remain vigilant for signs of repricing before making their next move.