Office Investment Deals Prop Up Property Investment Market In The First Half Of 2014

Desmond Sim, Head, CBRE Research, Singapore said “Rents are rising and vacancy rates are falling and this trend is expected to continue for the foreseeable future, especially for the CBD Core market. The few enbloc office deals that have been signed are expected to supplement the already active office strata market.”

In Q2 2014, office sector investment deals from both the private and public sectors accounted for $1.846 bn or 40.7 per cent of the total investment sales volume. The private investment sales market for Q2 2014 remained relatively healthy as it accounted for $2.544 bn or 56.1 per cent of the total investment sales volume. While the majority (25 out of 38 deals) of the quarter’s private sector transactions were priced below $100 million, two office deals, the sale of Equity Plaza and Prudential Tower, were traded in excess of $500 million. Equity Plaza was sold for $550.0 million from D.L. Properties Ltd (Keppel Land & Alpha Core-Plus Real Estate Fund) to Plaza Ventures Pte Ltd (GSH Properties Pte Ltd, Vibrant DB2 Pte Ltd & TYJ Group Pte Ltd). Prudential Tower was sold for $530.9 mill from Keppel REIT to Epic Land Pte Ltd (Lian Beng Capital Pte Ltd, KSH Commercial Investment Pte Ltd, KOP Cecil Pte Ltd and Centurion Cecil Pte Ltd).

The largest investment deal of the quarter was the public sector award of the office land parcel in Woodlands Square that resulted from the GLS programme to the tripartite of Far East Civil Engineering Pte Ltd, Tannery Holdings Pte Ltd and Sekisui House Ltd for $634.0 million. and Cecil House for $110.0 million from the sale of the holding company, Ececil Pte Ltd to Shentoncil Pte Ltd.

The residential sector was also another major contributor to the quarter’s total investment sales volume at $1.622 bn or at a 35.8 per cent share in the second quarter of 2014. The sale of public sector residential sites made up the bulk of the residential investment sales quantum. There were four public sector residential sites (including two executive condominium sites) awarded in Q2 2014 for a total of $1.357 bn.

In Q2 2014, apart from the divestment of Prudential Tower by Keppel REIT, REITs have also continued to be active in boosting their portfolios. A-REIT made a sale and leaseback acquisition of Hyflux Innovation Centre for $170.0 million. Hyflux Ltd and Hydrochem Pte Ltd will collectively leaseback approximately 50 per cent of GFA for 15 years. Frasers Centrepoint Trust also acquired Changi City Point for $305.0 million from Ascendas Frasers Pte Ltd; a 50:50 joint-venture between FCT’s sponsor, Frasers Centrepoint Ltd, and Ascendas Development Pte Ltd.

The hospitality sector also continued to see investment activity. It was reported that the last day of the quarter saw the Hotel Grand Chancellor in Little India sold to an unnamed party for $248 million.

Mr Sim added “Going forward, the investment market is expected to experience a slowdown on the back of the overall cautious sentiment in Singapore’s property market following the introduction of the TDSR as well as the cut-back in GLS sites up for tender in the next six months. Investment activity is likely to be nudged ahead by the office sector with investments in completed strata office properties as well as some en bloc office buildings.”