Singapore seen as one of most active capital sources in 2021

Singapore

SINGAPORE is expected to be among the top five sources of active capital in 2021, with investments bound for real estate assets in markets such as Australia, the United Kingdom and China, according to Knight Frank.

Outbound investments from Singapore to Australia are expected to climb to US$3.82 billion next year, the real estate consultancy estimates, which is 28 per cent higher than the five-year average of US$2.98 billion. In contrast, investment activity this year has been hampered by border closures and various lockdowns, with transaction volumes totalling US$2.32 billion year-to-date.

Still, investors in the region this year have been finding ways to work around border closures, such as through virtual viewings and relying on investment managers on the ground to focus on safe haven markets such as Australia.

Capital flows from Singapore into the United Kingdom and China are expected to clock US$3.12 billion and US$3 billion respectively next year. For 2020 year-to-date, outbound capital from Singapore to UK stands at US$1.37 billion, and US$4.65 billion to China.

Where outbound investments are concerned, the United States leads the global rankings, followed by Canada and Germany. Singapore is in fourth place.

The low interest rate environment has Singapore investors looking to a barbell strategy of defensive, stable income as well as high returns from entrenched growth trends, Knight Frank highlighted.

"While Covid-19 has dampened investment appetite in the short term, we expect a reversal in Q4 and into the new year," said Neil Brookes, head of capital markets (Asia-Pacific) at Knight Frank, pointing out that capital flows from Asia to Australia have already started to gain ground as investors laser in on resilient markets and assets.

With the various restrictions on physical travel, Knight Frank also sees intra-regional investment into "near neighbour" locations since cross-border property investment allows for diversification and revenue generation.

Within the Asia-Pacific, the office sector was the most active in the first nine months of this year, accounting for about 45 per cent of all transaction volumes.

Mr Brookes noted a shift towards suburban office assets, including from Singapore real estate investment trusts such as Ascendas Reit and Keppel Reit, as the pandemic forced people to work from home.

"It's an area we see a lot of growth in going forward. A lot of office tenants are moving towards that hub-and-spoke model. Those suburban office assets closer to where people live are increasingly in demand."

Industrial assets - such as data centres and distribution centres - were also in high demand with a record amount of investments, accounting for 23 per cent of volumes. The market share for the industrial asset class is 50 per cent higher vis-a-vis its five year historical average.

And as Chinese tech giants such as Tencent look to open new offices in Singapore, this should prove positive for Singapore's occupier market, said Emily Relf, head of outbound capital (Asia-Pacific) for Knight Frank, during a virtual panel discussion. "The likes of ByteDance and Tencent increasingly hiring in Singapore and taking up office space might lead to some pushing up of rental values in two to three years time, especially with limited supply in the market."

Joe Biden's victory in the recent US presidential elections is also seen as a boon for the Asia-Pacific capital markets as it is expected to allay fears over an acrimonious trade war with China. In addition, the president-elect has committed to keeping stimulus in place, which bodes well for stability, Knight Frank highlighted.

Meanwhile, the Singapore-Hong Kong air travel bubble, which takes off this week, could encourage some Hong Kong investors - who are traditionally UK focused - to scout for opportunities in Singapore too.