In 4Q2022, sales of real estate investments dropped by 22% year over year to $4.5 billion

The real estate investment market was worth $31.9 billion by 2022. This is an increase of 20.4% y-o-y from the $26.5 billion that was recorded in 2021, according research conducted by Knight Frank Singapore. This growth was helped by the opening up of borders and economies around the globe during the first quarter in the calendar year.

But, business confidence slowed during the second quarter of the year due to fears of a slowdown in the economy along with heightened inflation, international political tensions, and disruptions to supply chain. In the end, total investment sales saw a 22% drop in the 4Q2022 quarter q-o -q up to $4.5 billion.

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Despite the market’s recent shift to more cautious, Daniel Ding, head capital markets (land and construction and International real estate) at Knight Frank Singapore, notes that the biggest deal of the year was made in the final day of the month in December 2022. the Hong Kong listed Link REIT agreed to purchase Jurong Point and Swing By @ Thomson Plaza for a combined $2.16 billion from Mercatus Co-Operative.

In light of rising interest rates Ding suggests that institutional funds are more likely to opt for an approach of waiting and watching. “This means that there is a chance for the private sector, not as dependent on debt financing and will be more involved in the commercial real estate sector in the coming months and with Singapore still being an oasis of peace in the uncertain global environment,” he adds.

Accordingly the appetite of investors for office space in strata was strong in the fourth quarter of 2022. Two of the high floors at Springleaf Tower were sold for $53.9 million ($2,510 per square foot) in November to Esteel Enterprise in November, and the fourth floor of 15 Scotts was transferred by Cortina Holdings for $49 million in October. “Given the larger scale and magnitude that the investments within the office sector of strata are likely to continue over the next weeks,” Ding says.

Overall commercial sales accounted for the largest portion of the investment sales in 2022. They were being followed by residential sales. Knight Frank highlights that residential sales increased in 4Q2022 following the award the two Government Land Sale sites, making $520.8 millions in revenue.

Regarding the collective sale, Knight Frank notes the market is active, with numerous sites are already in the process. “More launches could be anticipated in 2023 and possibly with higher results, as long as the prices remain reasonable and are compared to an amount that falls within the risk tolerance for developers,” comments Chia Mein Mein, the head of capital markets (land and collective sale) for Knight Frank Singapore.

Chia says that the limited availability of fresh inventory could be a factor in developers in their demand for common sale parcels.

Additionally, Singapore recorded outbound investment sales of $13.7 billion in the 4Q2022 according to data from Real Capital Analytics. This represents an 22.4% decrease from the prior quarter. The assets acquired were mostly warehouse and office buildings and the gateway cities of Japan are among the top choices of Singapore investors.

Outbound deals that were significant in 4Q2022 include M&G Real Estate’s purchase an office building of prime quality, Minato Mirai Center, located in Yokohama with a value of more than $997 million as well Gaw Capital Partners’ purchase of a collection that includes logistics properties in Tokyo in the amount of $732 million.

Overall, Knight Frank views the decline in investment activity as likely to continue for the 1H2023 period until there are further tangible signs of stabilisation in the economy and improved business conditions. Knight Frank is predicting the real estate investment market to range between $22 billion to $25 billion in the entire period of 2023.