Investment Sales Could Hit $25b This Year: CBRE

Source : The Business Times, March 18, 2008

This would be about half of the record $54.5b of deals done last year

DESPITE the current subdued mood, property investment sales this year could be substantial - about half of the record $54.48 billion clocked last year, CB Richard Ellis estimates.

It bases the estimate on a tally of $5.91 billion of investment sales deals struck in the first two-and-a-half months of this year.

'Assuming Q1 2008 ends with $6 billion, the full-year figure could be around $24-25 billion. That would still be the third most active year on record, after $54.48 billion in 2007 and $30.59 billion in 2006,' says CB Richard Ellis executive director (investment properties) Jeremy Lake.

Investment sales are seen as a gauge of major players' confidence in the sector's mid- to long-term prospects.

CBRE's definition of investment sales includes those with a value of at least $5 million, comprising government and private sales, buildings and land, strata and en bloc. It also includes change of ownership of real estate via share sales.

Mr Lake reckons momentum this year will be generated by the sale of income-producing completed properties like malls, office blocks and industrial buildings, as well as the sale of sites through the Government Land Sales Programme, while the collective sales market has stalled.

'Continued strong growth in Asia, coupled with Singapore's position as a financial services hub and popular business destination for MNCs, will help maintain a healthy level of investment activity in the Singapore property market,' CBRE said in a report issued yesterday.

CBRE's analysis shows the private sector made up 55 per cent or $3.27 billion of the $5.91 billion investment sales deals sealed in the first two-and-a-half months of 2008.

Land sales by the public sector contributed the remaining 45 per cent or $2.64 billion.

The biggest land deal so far this year was the award of a hospital site at Novena Terrace/Irrawaddy Road to Parkway Holdings for $1.25 billion ($1,600 per square foot per plot ratio).

Splitting deal value by sectors, CBRE said the residential sector accounted for $2.23 billion or 38 per cent of total investment sales.

'Compared with the heightened investors' interest in en bloc acquisition witnessed in 2007, investors' demand for private residential land continued to be lukewarm in the first quarter of 2008,' it said.

'Developers are no longer as keen to acquire more sites compared to last year as most of them have built a relatively strong inventory of freehold residential sites from the robust collective sales market in 2007.

'Developers have already taken the cue to act cautiously. The buying of sites has been so far limited to specific choice sites since the response to recent new launches has been subdued.

'In addition, the release of more affordable 99-year leasehold residential sites by the government for sale in the first half of 2008 may sway some buying interest away from prime freehold residential sites in the private sector.

'The only successful collective sale deal in Q1 08 was Ban Guan Park, which was acquired by Link THM Holdings for $31.10 million ($870 psf per plot ratio).'

The office sector accounted for 34 per cent or $2.01 billion of investment sales so far in 2008, on the back of big transactions like Hitachi Tower for $811 million or $2,901 psf, Singapore Power Building ($1.01 billion or $1,820 psf) and One Phillip Street ($99.02 million or $2,749 psf).

'Going forward, strong office demand and potential for further rental escalation would lead to more acquisitions of office properties in 2008.' CBRE said. 'The sustained influx of foreign investors should continue to lead to steady activity in the office investment market.'