Investment sales got off to a flying start in the first quarter of the year, growing 34.4% QOQ to reach SGD10.6 billion, the highest quarterly volume since Q4 2017. This was driven by major commercial deals, government land sites, and related party transactions. For Q1 2021, residential made up the bulk of investment sales (29.0%), while retail came in second (25.4%) with office sales tailing closely behind at (21.3%). 

Melvin Chay, Director, Capital Markets & Investment Services, commented: “As borders reopen, there is likely to be keener competition for core and stable yielding assets in Singapore. Further, renewed attention will be given to beneficiaries of the recovery such as retail and hospitality assets.”

Prices and volumes expected to grow at a milder and more sustainable rate

Prices and volumes are expected to grow at a milder and more sustainable rate as investors factor in the various headwinds such as rising inflation and interest rates. Nevertheless, higher cross border activity and more diversified sources of capital raising will still drive direct and entity-level transactions.

Post cooling measures, we expect developers to bid more cautiously for both public and private sites. The success of collective sales might also be hindered by the price expectation gaps between both sides.

Demand for core plus and value-added opportunities, with renewed interest in prime retail and hospitality assets

The search for higher returns will drive demand for core plus and value-added opportunities, where investors source for properties with potential for repositioning and asset enhancement, such as the repurposing of older office stock, or smaller hotels for conversion into co-living.

With ample capital targeting a limited supply of stock, assets in prime locations will continue to see capital growth. For industrial space, cap rate compression might result in a greater allocation to development or redevelopment projects.

Finally, we expect renewed interest in prime retail and hospitality assets, beneficiaries of a recovery from the reopening of borders.

To view full report please contact Melvin Chay, Director, Capital Markets & Investment Services, Colliers via the below contact details.