Property investment sales to accelerate across all segments in 2020

Commercial, hospitality, and industrial properties tipped to be investment bright spots in 2020.

Investment sales are projected to touch $31.3b in 2020, a 6% YoY increase for the year, reports Colliers International.

In 2019, total investment sales volumes fell by 12.7% YoY to $29.5b, largely due to the pull back in the residential property sector as cooling measures continued to bite, noted Colliers.

Collier’s head of research Tricia Song anticipates a few major REIT acquisitions and mergers to materialise in 2020, which should potentially boost industrial, commercial, and hospitality deals.

“The rejuvenation efforts of the government such as the CBD Incentive Scheme should encourage the redevelopment of eligible older assets in the central business district (CBD) and city fringe areas in the next three to five years,” Song said.

The more benign economic growth forecast for Singapore in 2020 also factors in, in lifting investor confidence, where Singapore’s economy is forecast to expand by 1.4% this year.

The commercial property sector accounted for 40% of total transactions, which led sales in 2019 is expected to drive investment sales again in 2020. Despite clocking slower sales in Q4 2019, the sector ended 2019 on a high note with $11.7b, the highest investment sales level since 2007. Colliers expects the remarkable pace of commercial activities to continue in 2020, rising by 5% YoY on the back of a healthy office rental market.

It also added that redevelopment potential, decentralisation push, coupled with investors’ interest and confidence should support an annual growth of 2% per annum over 2019-2024.

On the residential front, investment sales slumped by 70% QoQ in Q4 to $900m due to the absence of sizeable public land sales. Full-year volume was also modest at $6.8b, a 63% YoY decline. However, Colliers projected that the residential investment sales could pick up 3% YoY in 2020, on the back of a stable supply of public land sales, sustained luxury home demand, and developers acquiring sites – via public tenders or the collective sale market – to shore up their development pipeline towards the end of the year.

Overall sentiment is likely to improve in the longer term, underpinning an average growth of 12% per annum in 2019-2024.

As for the hospitality sector, deal volume in Q4 2019 decelerated from a very strong Q3, down by 51% QoQ to $1.4b. Its investment sales skyrocketed by 360% to $5.7b, hitting an all-time high.

Completed deals in Q4 included Andaz Hotel, Novotel Singapore Clarke Quay, and W Singapore.

Colliers believes that investment demand for Singapore’s hospitality assets are to remain sustained, supported by a muted supply pipeline and steady visitor arrivals on new attractions and more MICE events. Whilst the 2019-nCov presents a near-term downside risk, its long-term growth drivers for the tourism sector will largely remain intact.

Lastly, industrial investment sales surged 232% QoQ and 10.7% YoY to $2.3b in Q4 2019. This was anchored by Mapletree Commercial Trust’s acquisition of Mapletree Business City. The quarterly figure also brought the total industrial deals in 2019 to $4b.

The report expects stronger investment demand for high-spec industrial spaces in accessible locations.

“Industrial sales are likely to accelerate in 2020, in particular, the realisation of big-ticket investments by industrialists as well as investments on yield-accretive assets like business parks and data centres. Industrial deals should rise by an average 15% per annum in 2019-2024 as the overall underlying market bottoms out,” Song noted.