Commercial property investment volume to increase in 2021
Savills IM expects commercial property investment volume for the whole 2020 to hit US$3.2 billion (S$4.3 billion). For next year, investment volumes could reach US$5.6 billion (S$7.5 billion) considering that Singapore property remains attractive for investors.
Singapore saw commercial property investment volume drop to US$2.7 billion (S$3.6 billion) during the first nine months of 2020 from US$8 billion (S$10.7 billion) over the same period last year, reported The Business Times citing Savills Investment Management (Savills IM).
For the full year of 2019, the figure stood at US$10 billion (S$13.4 billion), while the 10-year average is US$7.7 billion (S$10.3 billion).
And since there are still some deals to be finalised for this year, Savills IM expects commercial property investment volume for the whole 2020 to hit US$3.2 billion (S$4.3 billion).
For next year, investment volumes could reach US$5.6 billion (S$7.5 billion) considering that Singapore property remains attractive for investors, said the real estate fund manager in a recent outlook report.
In fact, Savills IM’s survey showed that the city-state is ranked fifth in terms of geographical markets that could receive the most real estate investments next year, following the US, UK, Canada as well as pan-Asia.
“Singapore stands out as one of the key markets that we expect will attract stronger real estate investment inflows as borders reopen and as an effective vaccine rolls out. Over the next five years, our long-term view is that most Asia-Pacific markets will likely out-perform the global average from an average returns perspective,” said Benedict Lai, Research Manager at Savills IM as quoted by The Business Times.
“Singapore is one of the markets within the region that would also outperform in the long term. The city state remains an attractive destination for foreign investors due to its stable policy regime, relative neutrality, sustainability initiatives and plans to become Asia’s digital capital.”
Key picks for the city-state include offices within the Central Business District (CBD), which are expected to receive increased investor interest, on the back of the government’s long-term rejuvenation plans as well as incentives for the area.
The real estate fund manager also likes Grade B properties within fringe-of-CBD that offer value-add opportunities and the logistics sector.
CBD offices, multifamily and logistics in key locations within the Asia-Pacific region will present attractive investment opportunities next year as investors regain confidence after the COVID-19 crisis, said the report.
It foresees no major demise for the office sector despite the hike in agile working due to the pandemic.
“Offices in CBD locations with good transport links are here to stay while the resilient income streams and long-lease tenancy of logistics assets represent a strong buy for core/core-plus investors.”
A clear winner during the pandemic due to the hike in online shopping, logistics will continue to be supported by structural tailwinds and solid fundamentals.
But given the low returns on traditional property assets, such as retail, office and industrial, investors are looking to alternative sectors like build-to-rent accommodation, student housing and data centres.
“The broad theme of increased allocation to logistics has also seen a similar trend in Singapore,” said Savills IM.
Investment volumes for income producing commercial properties within the city-state slowed down since the start of 2020, except for industrials which include business parks, high-tech space, factories and logistics.
Although offices continue to account for 50% of investment volumes for the first nine months of this year, the percentage of industrial transactions doubled to 25% from 13% during the same period last year.
Specifically, more than US$675 million (S$902 million) worth of industrial deals were registered since the start of the year to Q3 2020.
Source: CommercialGuru, 2 Dec 2020