PAG’s S$775 mil purchase of Mapletree Anson is Singapore’s biggest deal so far this year (Image: MPACT)
Private investment in Singapore real estate rose 26.7 percent in the second quarter of this year, compared to the same period in 2023, to reach S$3.32 billion ($2.47 billion), following some major transactions in the city-state’s urban core.
The jump in private deals came as overall investment from April through June, including government land sales, climbed to S$6.48 billion, nearly doubling the S$3.29 billion total from the same months last year, thanks to a surge in state sales of development parcels, according to newly released research by Savills.
The property consultancy attributed the private sector rebound in part to property owners acknowledging the realities of a higher interest rate environment, as properties traded at values below earlier years.
“More properties have been launched for sale in the last six months with some sellers deciding to adopt proactive sale strategies rather than sitting passively and waiting for buyers to come along,” Jeremy Lake, managing director for investment sales and capital markets at Savills in Singapore said in a statement. “While the appetite from buyers has improved, there is still a price gap in many cases and only some of the properties will be sold.”
Major Deals Move Market
Leading Singapore’s rebound in transactions during the second quarter was Mapletree Pan Asia Commercial Trust’s sale of the Mapletree Anson office tower in the Tanjong Pagar area to regional private equity titan PAG for S$775 million, with that deal ranking as the city-state’s largest office transaction in two years.
Jeremy Lake, managing director for investment sales and capital markets at Savills Singapore
The May sale of that 9-storey Grade A office block is believed to have been triggered in part by the seller’s need to reduce leverage as property values slide and the cost of borrowing remains elevated. Mapletree Anson sold for S$2,352 per square foot, or 19 percent less than the S$2,900 per square foot of net lettable area which KKR paid to acquire the neighbouring Twenty Anson from AEW in April 2022.
The quarter’s second-largest transaction was City Developments Ltd’s S$439 million purchase of the Delfi Orchard tower just a few days before the Mapletree Anson agreement was announced. CDL is believed to have plans to combine that mixed-residential and commercial complex with the neighbouring Orchard Hotel Singapore to create a combined residential, commercial and hotel project on Orchard Road.
Ranking third among private investment sales during the second quarter was Mapletree Investments selling 20 Harbour Drive, a commercial complex in western Singapore’s Pasir Panjang area, to Keppel Education Asset Fund (KEAF) for S$160 million during June.
During the second quarter of 2023, Singapore’s largest private investment transaction was ESR-Logos REIT’s S$313.5 million sale of a set of five industrial properties to EZA Hill, a shed investment specialist controlled by Hillhouse Investment’s Rava Partners unit.
Despite the rebound in transactions, some major deals failed to materialise, with mainland-backed investor Bright Ruby Resources backing out of a deal to purchase the Far East Shopping Centre on Orchard Road for S$908 million, after failing to win regulatory approval to expand the project’s floor area.
Owners of the aging complex later rejected a reported May offer of S$850 million from an Indonesian investor, with the future of the shuttered property remaining unclear.
Rates Seen to Have Peaked
Singapore’s second quarter private investment activity also outstripped the S$2.79 billion in deals recorded during the first three months of this year, with Savills seeing the stabilisation of interest rates, along with the potential for reductions in borrowing costs this year, as buoying investor confidence.
“Presently, the market expects at least one rate cut for 2024, said Alan Cheong, executive director for research and consultancy at Savills in Singapore. “Although this may just be a symbolic 25 basis points reduction, the mood is now one that anticipates that rates have peaked. Therefore, any cut would help lift sentiments.”
Based on the market performance of the market so far this year, Cheong reiterated the consultancy’s prediction of S$22 to S$23 billion in total investment sales this year, up from S$19.7 billion in 2023.