Investment sales volumes in commercial and industrial sectors are projected to recover slightly in the second half of 2020, with the economy reopening, for a 24% full-year decline
- Investment sales in commercial and industrial sectors fell 48.9% year-on-year (YOY) in the first half of 2020, the worst performance in 11 years, as investors delay investments amid turmoil
- Commercial and mixed-use assets made up 72% of total investment sales in Q2, driven by some big-ticket deals by foreign investors during Q2 2020
- H1 industrial investment sales volume rose 30.5% YOY, as investors increased focus on warehouses, business parks and data centres
- Residential investment sales volume fell 20% YOY to S$2.2 billion in first half of 2020, the worst half since 2009
Colliers International on July 15, published its latest market research report which examines the performance of Singapore real estate investment in Q2 2020 and its prospects ahead.
Colliers Research projects that Singapore investment sales volumes for commercial and industrial sectors could recover slightly the second half of this year, with the economy reopening, for a 24% full-year decline.
Jerome Wright, Senior Director of Capital Markets and Investment Services at Colliers International, said, “In the longer run, Singapore remains an attractive investment destination. There are definitely opportunities for investors with long term growth drivers, such as logistics warehouses, good quality office buildings and well-located hotel assets.”
Colliers Research reports that because the domestic and most external economies were under lockdown, Q2 2020’s GDP growth would probably be the worst since the Global Financial Crisis (GFC). On May 26, the Ministry of Trade and Industry (MTI) cut its guidance for 2020 GDP to be between “-4 to -7%”.
As of June 30, Oxford Economics forecasts Singapore’s 2020 real GDP growth to be -6.0% but expects to see a relatively strong rebound in H2 2020 and 2021 (+7.1%) due to the unprecedented fiscal stimulus packages (of over S$93 or US$67 billion) and monetary easing.
Colliers Research also reports that Commercial and Industrial sectors dominated Q2 Investment sales. The largest commercial deals during Q2 include Alibaba buying a half stake in AXA Tower, valuing the property at S$1.68 billion; and Shun Tak Holdings buying the remaining 30% stake it did not already own in TripleOne Somerset — the whole of which was valued at S$1.14 billion. Two large warehouses were sold in Q2, to LOGOS and DWS respectively, pointing to rising confidence in the logistics property prospects.
Tricia Song, Head of Research for Singapore at Colliers International, said, “These transactions reflect the long-term attractiveness of Singapore to foreign investors. The most recent General Election results still show broad-based support for the government. Investors can be assured of policy continuity and business stability going forward.”
Commercial (Office and Retail)
Commercial investment sales dipped by 1.2% quarter-on-quarter (QOQ) to S$748.8 million, buffeted by transactions in AXA Tower, TripleOne Somerset, and 30 Raffles Place retail and banking units.
Mr. Wright added, “Commercial and mixed-use deals made up 72% of the Q2 tally, as foreign investors picked up sizeable stakes in several central business district (CBD) properties. We expect the investment sales volume to recover slightly this second half of the year as the economy reopens slowly.”
Residential transactions plunged in Q2 87.6% QOQ and 84.7% YOY to S$245.4 million with no land sales and limited property viewings. Volume fell 20% YOY to S$2.2 billion the first half of this year, the worst result since 2009.
Colliers Research still anticipates the market sentiment to recover in the longer run, underpinning a growth of 12% per annum on average over 2019-2024.
Industrial investment sales saw a 69.9% drop QOQ from a strong Q1. However, volumes in first half of the year grew 30.5% YOY, anchored by two large logistics warehouses and one data centre deal in Q2, as well as Frasers Logistics and Industrial Trust (FLT)’s acquisition of Alexandra Technopark and Ho Bee Land’s tender for Biopolis Phase 6 site in Q1 2020.
Steven Tan, Senior Director of Capital Markets and Investment Services at Colliers International, said “We see positive long-term growth as investors and industrialists seek warehouses, data centres and hi-spec space to leverage on growing ecommerce, technology and manufacturing trends.”
In an earlier research, Colliers assessed seven core trade sectors in Singapore – manufacturing, financials, construction, professional services, hospitality, retail and technology – and considered three factors, GDP growth, stock index returns and earnings outlook.
Ms. Tricia Song, Head of Research for Singapore at Colliers International, said, “We recommend investors to focus on prime offices and industrial buildings, such as hi-spec space and business parks. Hotels and retail malls could also provide near-term opportunities. Occupiers should embrace technology and more flexible work strategies in the longer term.”
Top Resilience and Rebound Ranking of Core Trade Sectors
Colliers’ Research ranks the resilience and rebound potential of core sectors is based on three metrics: historical GDP performance and stock index returns during and post other major crises, as well as future earnings growth.
Market Implications and Outlook
Industrial sector to benefit from Manufacturing rebound post-COVID-19
While the manufacturing sector is expected to contract in the near-term due to labour shortages amidst more stringent restrictions during COVID-19, our research suggests a strong rebound in the sector as Singapore emerges from the pandemic and Circuit Breaker measures. This bodes well for the industrial sector.
Rick Thomas, Head of Occupier Services for Singapore at Colliers International, said: “The strong rebound of the manufacturing sector expected post pandemic, together with increasing technology adoption, e-Commerce sales, delivery service needs, data broadband usage and other online activities, will directly benefit the sector across business parks, logistics spaces and data centres.”