Property investment market continuing improvement in Q2: Knight Frank

THE property investment market has continued to improve in the second quarter of this year amid a more certain economic recovery both locally and overseas, with developers as well as retail and institutional investors leading the deals.

Investment deals reached a total of S$5 billion in Q2, a 127.3 per cent on-year increase from the S$2.2 billion worth of deals recorded in the same period last year, said Knight Frank Research in a report on Tuesday.

Knight Frank defines private investment sales as transactions totalling S$10 million and more, and institutional transfers that represent a change of legal ownership.

"The recent frenzy of bullish bids for three Government Land Sales (GLS) sites in May and June signified developers' appetite for development land to replenish dwindling land banks," the research team said.

It noted that a land site at Northumberland received 10 bids and was awarded for S$445.9 million, a site at Ang Mo Kio Avenue 1 drew 15 bids and was awarded for S$381.4 million, while a site at Tengah Garden Walk attracted seven bids and was awarded for S$400.3 million.

Knight Frank expects demand for land sites to stay robust given brisk sales in the private home market, particularly for plots that are not too large in size with a potential for 600 units or less, and in desirable locations.

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The residential sector has also continued to draw interest fuelled by deals within the landed house segment, led by sales of Good Class Bungalows (GCBs) which totalled S$526.4 million. These include the sale of detached homes at 71 Grange Road and 5 Astrid Hill, which changed hands for S$48 million and S$44.3 million, respectively.

The research team said both the landed and non-landed residential markets will likely be boosted this year by more family offices setting up in Singapore, and by the potential pent-up demand from prospective foreign buyers once travel resumes, with activity likely to increase even more in the second half of the year.

In the commercial sector, investment sales totalled S$1.5 billion in Q2, led by the sale of Suntec Reit's 30 per cent stake in the 9 Penang Road building for S$295.5 million and the collective sale of Maxwell House for S$276.8 million. Shophouses also posted a "hot streak of deals" worth S$268 million.

Meanwhile, investment in the industrial segment also remained high amid demand for semiconductors as well as expansions in technology-based manufacturing. Notable sales include ESR-Reit's purchase of a warehouse facility at 46A Tanjong Penjuru for S$112 million in May, and the sale of a single-user factory TBC Building for S$74 million.

The draw of stable recurring income could possibly lead to more sale and leaseback deals in the next six months, Knight Frank added.

Beyond the city-state, outbound investment sales more than doubled on year with some S$2.5 billion worth of deals recorded from April to June. Major investments include Mapletree Industrial Trust's proposed acquisition of a S$1.8 billion data centre portfolio in the United States, and Frasers Logistics & Commercial Trust's S$548.7 million purchase of six freehold logistics and industrial properties in Germany, the Netherlands and the United Kingdom.

Noting Singapore's plans to transit to normalcy, Knight Frank said investment activity will likely pick up pace in the second half of 2021 and could potentially reach about S$30 billion in deals for the whole year, despite totalling some S$9.5 billion at the halfway mark.

"The pandemic highlighted Singapore's reputation as a stable bulwark for investment during troubled times," the research team said.

It expects investment deals in the second half of the year to be led by developers competing for government land sites or accumulating smaller collective sales sites with a potential for about 200 new residential units, high-net-worth investors looking to snag GCBs, shophouses and strata office units, as well as institutions drawn to commercial and industrial assets.

Knight Frank added that overseas travel would also support further recovery by boosting retail and hospitality services.