Singapore real estate investment sales to hit up to S$23b this year

This will be due to a more active GLS market.

For the bigger ticket income producing assets, sales activity in Singapore this year depends heavily on the trajectory of interest rates. 

According to Savills, with the all-in borrowing costs for private equity buying income producing real properties sandwiched in the 5.2% to 5.7% range, this group will continue to find the notion of positive carry illusory when asking prices for prime office buildings carry a passing yield of 3.5%. 

Here’s more from Savills:

Retail assets however find better transactionary prospects this year as their yields are hovering at the high 4.0% level. Also, borrowing spreads may be tighter for prime suburban malls and this brings the likelihood of a deal higher when the scarcity of prime stock available for sale may motivate buyers to commit. Even for Orchard Road, the lack of new sites for retail development may bring about a sale or two landmark malls in 2024. 

For the industrial sector, questions linger over the performance of the manufacturing sector here in 2024 and this may lead to the continuation of the conservative attitude exhibited by buyers which began in 2H/2023. 

The collective sales market for residential is likely to see another year where developers exercise caution and be more inclined to replenish their land banks from the GLS sites. For 2024, we will have eight sites from the 2023 GLS program closing their tenders. 

It is likely that for the full year, given the spillover tender closing from the 2023 program and those likely to close in 2H/2024 from the first half GLS program this year, the final number will likely be higher than last year. How much more will depend on whether the mega site at Jurong Lake District will be sold. 

For 2023, our total investment sales value came in at S$20.5 billion. This year, given a more active GLS market and the prospect of interest rates falling in 2H/2024, total investments may come in at S$22.0 to S$23.0 billion.