Real estate investment activity up 48% in Q2

Real estate investment activity in Singapore has picked up in the second quarter of 2012.

According to DTZ Research, investment activity for the second quarter increased 48 per cent on-quarter to S$6.9 billion.

Meanwhile, investment deals for the first half of 2012 totalled at S$11.6 billion, dropping 32 per cent from S$17.1 billion on-year.

Land sales made by the government declined too, accounting for 43 per cent of overall investment value — lower than the historical average of 48 per cent over the previous four quarters.

REITS became net sellers in the second quarter from being net buyers in the first quarter.

This was due to divestments made to achieve greater value for REITS’ unit holders, which would otherwise have required greater capital to hit higher rentals and occupancy rates.

Acquisitions made by REITS fell by 61 per cent on-quarter to S$290.1 million.

There were only two REIT investment acqusitions made in the second quarter, with Cache Logistics Trust acquiring Pandan Logistics Hub and K-REIT expanding its stake in Ocean Financial Centre.

Cross-border activity also saw improvement, with values of cross-border transactions jumping 43 per cent compared to the previous quarter.

This was chiefly a result of purchases made by inter-regional funds, which accounted for 57 per cent of cross border investment in the second quarter.

Cross-border investment, however, continues to account for 16 per cent of real estate activity during the second quarter — similar to the first quarter.

Chua Chor Hoon, DTZ’s head of Asia Pacific research, said: ” Although we see an increase in enquiries from foreign investors, they are also looking to other countries, such as China, Japan and Australia, for growth opportunities and higher yields. Against this backdrop, 2012 investment sales activity is likely to be less than 2011′s S$28.6 billion.”

DTZ analysts expect investment activity in the second half of 2012 to be dominated by developers purchasing GLS sites and REIT activity. This includes the divestment of Somerset Grand Cairnhill by Ascott Resident Trust and expected listings of Far East Hospitality Trust and Ascendas Hospitality Trust.

Shaun Poh, head of DTZ Investment Advisory Services and Auction, said: “Deals are taking longer to complete as there are more sellers than buyers in the market and there is still a pricing gap between sellers’ and buyers’ expectations.”

Source : Channel NewsAsia – 16 Jul 2012

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