Demand for property in the city-state last quarter was broad-based
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Investment in commercial real estate in Singapore has increased by 774% year-on-year in 2Q2022 and increase to US$5.6 billion ($7.7 billion) according to a market study from MSCI. The world’s leading market analytics company found that the consumers’ demand in property that is located in city states in the past quarter was broad in nature, with CBD offices being the most popular source of the investment capital , while hotels and shopping centers were not far behind on the investors’ radar.
“Commercial real estate investments in Singapore has been quiet for both of the previous recessions, however 2022 has proved to be the third time lucky by registering an unprecedented level of activity thus far. While the broader regional slowdown has largely been attributable to a fall-off in smaller deals, Singapore’s institutionally-dominated market has shrugged off the macroeconomic headwinds,” says Benjamin Chow, head of asia real assets research at MSCI.
However other regions portion of Asia Pacific market did not perform as well, as the financial and economic environment slowed commercial property deals in the 2Q2022 period, according to MSCI.
The last quarter saw investments in the amount of US$45.1 billion, which represents the equivalent of a 24% decrease compared to the previous. This was primarily due to an increase in the value of the trades of particular properties which reached US$33.1 billion in the quarter, as compared the average figure of $40 billion in 2021.
The company also stated that the number deal makers and buyers in the area decreased and this suggests that the liquidity of the region is suffering. “The increase in interest rates has had a negative impact on the activity of deals in a variety of the core markets. The rising cost of borrowing has made it difficult for smaller buyers to buy and this is evident in deal values with less than $50 million were the lowest in all activity measures,” says Chow.
Sector-wise the industrial properties performed the worst in the in the last quarter, with transaction volumes falling to 62% from a year ago in the range of US$7.2 billion. MSCI reports that yield spreads in the industrial sector have been squeezed because of rising borrowing costs.
The office industry reported investment deals of US$22.2 billion in the 2Q2022 9% growth y-o-y, while retail investment saw 30% reduction in value compared up to US$9.6 billion.