SINGAPORE – Local and foreign investors may gravitate towards commercial and industrial collective sale sites that are not subject to additional buyer’s stamp duty (ABSD) following the April 27 round of cooling measures, but higher interest rates and slowing economic growth may weigh on demand, say analysts.
According to property consultant JLL, non-residential collective sales (including commercial, mixed-use and industrial) totalled $195 million so far in 2023, compared with $1.98 billion in 2022, and $1.02 billion in 2021.
The strong showing in 2022 was due largely to the $700 million collective sale of Golden Mile Complex to a consortium comprising Far East Organization and Perennial Holdings, and the $868 million sale of Tanglin Shopping Centre to Indonesian billionaire Sukanto Tanoto’s pulp, paper and palm oil giant Royal Golden Eagle (RGE).
So far in 2023, three deals have been recorded – the $80 million sale of GSM Building in Middle Road to a subsidiary of Singapore-listed LHN, the $67 million sale of GS Building in Balestier to JVA Venture, a local boutique property developer, and the sale of freehold mixed-use property Choon Kim House in March for $48 million, according to JLL.
Shortly after the new cooling measures kicked in, a commercial site in Hoe Chiang Road and Lim Teck Kim Road was put up for collective sale via public tender for a second time at a reserve price of $216 million. The 999-year leasehold site, just off Tanjong Pagar Road, was first launched in January 2023, but the tender closed without any bids.
Ms Tracy Goh, head of investment and collective sales at PropNex, noted that commercial property investors are “evaluating the impact of higher borrowing costs on capital values”.
But the office segment remains resilient, with the Urban Redevelopment Authority office rental index rising by 5.1 per cent quarter on quarter in the first quarter of 2023, she said.
“Recent transactions at the upcoming Solitaire on Cecil have also been hitting record prices – three floors were sold for an average price of $4,300 per sq ft in April,” Ms Goh said.
Cushman & Wakefield head of research Wong Xian Yang said he sees commercial collective sale deals slowing in 2023 due to higher borrowing costs and a widening gap in price expectations between buyers and sellers.
“Nonetheless, family offices and institutional investors with deep pockets remain active in acquiring or seeking opportunities in the commercial en bloc market for wealth preservation and diversification,” he said.