Fed Rate Cut Bolster Investment Sales Especially Industrial And Living Sector Assets Knight Frank
The highly anticipated decrease in interest rates by the US Federal Reserve has brought new life to the real estate capital market. According to a report by Knight Frank Singapore, there has already been a resurgence in investment activity.
In the third quarter of 2024, a total of $8.3 billion worth of real estate investment deals were made, an increase of 24.8% from the previous quarter. Knight Frank attributes this growth to an increase in investor activity in anticipation of the rate cut. On September 18th, the Fed reduced interest rates by half a percentage point, the first cut in over four years. Most of the investment deals in the third quarter were private sales totaling $6 billion, while public sales accounted for the remaining $2.3 billion. The industrial segment saw the biggest surge in activity, with industrial investment sales increasing by 427% to hit $2.5 billion in value.
The increase was driven by the sale of a portfolio of seven Singapore industrial properties to a joint venture between global private equity firm Warburg Pincus and Australian-listed Lendlease Group for $1.6 billion. Other notable industrial transactions include the purchase of a 51% stake in an industrial site at 20 Tuas South Avenue 14 by ESR-Logos REIT for $444.6 million, and Ho Bee Land’s sale of a 49% stake in Elementum, a biomedical sciences development, to a sovereign wealth fund for $272 million.
Residential investment deals made up $3.2 billion of total sales in the third quarter, a decrease of 24.7% from the previous quarter. However, over two-thirds of the sales, or $2.3 billion, were government land sales (GLS). These include Zion Road (Parcel B), which was awarded to Allgreen Properties for $730.09 million and an executive condominium site on Jalan Loyang Besar that sold for $557 million to a consortium of developers.
A number of good class bungalow (GCB) deals also contributed to the residential investment sales. For instance, in July, a GCB at Tanglin Hill was sold for $93.9 million, while two GCBs on Belmont Road were sold for $73.7 million and $57.7 million respectively in July, according to Knight Frank.
Commercial deals made up $2.7 billion of total investment sales in the third quarter, a 37.2% increase from the previous quarter. The segment was boosted by the sale of Ion Orchard by CapitaLand Investment (CLI) to CapitaLand Integrated Commercial Trust in September for $1.85 billion. Other commercial assets sold in the third quarter include the sale of Stamford Court for $132 million.
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A combined statement released by Hoi Hup Realty and Sunway Developments on September 12 revealed that the site’s leasehold, spanning over 99 years, encompasses 16,441.2 square meters and permits a maximum gross floor area of 46,036 square meters. The highly coveted Novo Place Showflat is included in the impressive features of this development.
However, the en bloc market remained relatively quiet in the third quarter, with only five collective sale launches and no successful deals. According to Knight Frank, larger residential sites continue to be challenging, but there is still demand for smaller sites. In addition, the initial round of interest rate cuts by the Fed is expected to pave the way for increased transactions. The consultancy is projecting investment sales momentum to further improve in the coming months, with total sales for 2024 expected to fall within its estimated range of $23 billion to $25 billion.