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Several factors contributed in the decline in Singapore’s real estate investment activity in Q4 2014, property consultancy DTZ said Thursday (15 January).
In DTZ’s latest release, it said real estate investment sales in Singapore slumped by 57 percent to S$2.38 billion in Q4 2014 on a quarterly basis with the slowdown in office sector investment activity as one of its cause.
In Q4 2014, office space investments plummeted by 92 percent to S$152 million.
“Although investors were attracted by the expected rental appreciation, investment activity was constrained by limited stock and yield gap in pricing expectations between sellers and buyers,” said the consultancy.
Another contributing factor to the weak property investment activity is the 52 percent quarter-on-quarter plunge in the sale of government land sites in Q4 2014.
However, real estate investment sales in the industrial segment increased in the private market in spite of the drop in total volume.
“For the whole of 2014, real estate investments fell by 38 percent to S$17.7 billion. Although property companies and REITs continued to be the biggest buyers in 2014, they invested less compared to 2013,” it noted.
In fact, investments by property firms declined to S$9.3 billion last year versus S$15.7 billion in 2013, while that of REITs fell to S$5 billion from S$7.2 billion previously.
Notably, the biggest property investment in 2014 was OUE Commercial REIT’s acquisition of OUE Bayfront from OUE for S$1billion.
“While the REITs were net buyers in 2014, the value of investments divested by REITs rose by 1.7 times from 2013 to S$524.5 million. Keppel REIT [primarily] contributed to the increase by divesting its stake in Prudential Tower for S$512 million,” said DTZ.
Looking ahead, DTZ believes that Singapore’s office market will continue to entice investors due to the expected rental growth in 2015, echoing Colliers International’s forecast that office properties in Singapore will remain sought-after this year.
Amidst this bullish projection, companies with expiring leases may opt to buy their own space to hedge against rising rents, said Ong Choon Fah, DTZ’s Regional Head of Consulting and Research for Southeast Asia.
“One example is Shanghai Tunnel Engineering Co. that bought a strata-titled unit in Prudential Towers for occupation in 2014 for S$16.37 million. This trend is expected to continue in 2015,” Ong added.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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