Investment sales fall in Q2 but foreign funds still looking

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Published July 10, 2008

Investment sales fall in Q2 but foreign funds still looking

Residential sector continued to soften, contributing 13% to the total

By ARTHUR SIM


PROPERTY investment sales in Q2 2008 saw a significant decline due to increasing cautiousness from investors and tightening of credit.

In a report, DTZ Research also noted that in the quarter, total transactions fell 37 per cent quarter-on-quarter (QOQ) to about $5.2 billion.

Total sales for H108 amounted to $13.5 billion, 33 per cent of 2007's total sales and 54 per cent of 2006's total sales.

However, DTZ said that since 2007 was an exceptionally active year for property investment, '$13.5 billion is not a low figure compared with sales in 2006 which was the second most active year in the last decade'.

The residential sector continued to soften, contributing only 13 per cent to total investment sales, mostly from government sale of sites.

Transactions in the industrial and commercial sector amounted to $2.4 billion, 45 per cent of total investment in the quarter.

Of note were the transactions by foreign investors, including Commerz Real AG which acquired 71 Robinson Road and Morley Fund Management which acquired Commerce Point.

Boustead Hub at Ubi Avenue 1 was also sold to a unit of SEB Asset Management.

Shaun Poh, DTZ's senior director (investment advisory services and auction), said: 'Although pressure on Reits has made them less active purchasers, investor interest especially from private equity funds remains strong as the property market is supported by economic growth and occupier market fundamentals.'

DTZ's Investor Intention Survey also revealed that overall, investors expect to increase funds allocated to property investments by an average 4 per cent, with a comparable figure for Asia- Pacific investors of 10 per cent.

DTZ added that US investors are intending to shift asset allocation significantly away to Asia-Pacific while European pension funds are also waking up to the investment possibilities of the region.

Although European pension funds' exposure in the Asia-Pacific is minimal at the moment, DTZ estimated that as pension funds begin to target the region, they could allocate as much as 20-30 per cent of their real estate portfolios to the region.

DTZ said, however, that the survey does suggest that within Asia-Pacific, China remains the primary area of interest, while there appears to be some shift in focus away from Japan, Australia and Singapore in favour of emerging markets such as Vietnam and Indonesia.

CB Richard Ellis (CBRE) believes that Singapore's long-term prospects as a financial hub and popular business destination for MNCs will see Singapore continue to attract both local and foreign investors' interest.

In a recent report, CBRE said: 'The more active investors in the short to medium term would be the core and core-plus investors who have a lower risk appetite and are able to fund their acquisitions largely with equity.'

Future new office supply has threatened to undermine occupier fundamentals.

However, CBRE added: 'At face value, potential confirmed supply seems abundant, but it should be viewed in context with a strong take-up. Some 22 per cent of known supply from 3Q08-2012 is pre-committed, with around 9 per cent under offer.'