Some building owners here are trying their luck for a collective sale despite the battering the commercial property investment market has taken in recent months.
At least four buildings that have garnered the requisite 80 per cent backing of owners for a sale en bloc have gone on the market since the circuit breaker was partially lifted on June 2.
The Arcade in Raffles Place has been relaunched at a reserve price of $780 million, while mixed-use tower High Street Centre at 1 North Bridge Road hit the market with a reserve price of $800 million on June 16.
Another mixed-use development – 101 Beach Road – and the GSM Building at 141 Middle Road are also up for grabs at slightly less than $100 million each.
In February, Singapore Shopping Centre in Clemenceau Avenue was relaunched for sale at an unchanged reserve price of $255 million, with provisional approval to rezone for hotel use.
“Most of them are doing it because of their depreciating leases,” said Ms Christine Li, Cushman & Wakefield, head of research for Singapore and South-east Asia.
“Singapore Shopping Centre has less than 30 years left on its lease and GSM probably has about 60 years. It’s time to reposition them, given the falling occupancy and footfall in the older malls.”
Ms Li added: “If given a choice, the (commercial property sellers) would probably wait out the pandemic. But there is a timeframe of 12 months from obtaining the 80 per cent to market the property and the owners need to adhere to (that).”
Ms Peggy Tan, director of investment services at Colliers International, noted that “more strata commercial buildings are getting old with no rental income growth, so this is motivating commercial owners to sell”.
But the jury is out on whether owners can achieve their asking prices, given that commercial building sales plunged 78 per cent year on year to US$432 million in the first quarter, noted Real Capital Analytics (RCA) data.
The steep drop was partly due to a high base as 2019 was a record year in Singapore, and the number of deals fell 32 per cent to just 13 for the three months to March 31, it noted.
Similarly, commercial collective sales have hit the wall with no deals so far this year. This comes after a healthy showing in 2019, when a higher proportion of commercial collective sale sites sold compared with residential deals en bloc after that sector was hit by 2018 property cooling measures.
Colliers International said transaction values for residential and commercial sites sold en bloc reached $538.38 million in 2019, with two commercial buildings – Selegie Centre at $120 million and Realty Centre $148 million – accounting for nearly half the total.
Only one residential site has been sold en bloc so far this year – Casa Sophia, a 12-unit freehold development in Sophia Road that went for $29 million.
“We expect the rest of 2020 to remain soft (for collective sale activity) in the light of Covid-19 and the recession,” said Ms Tricia Song, Colliers International’s research head for Singapore.
But there are signs of green shoots.
Analysts cited major deals, including Perennial Real Estate-led consortium’s sale of a half-stake in AXA Tower to Alibaba at an agreed property value of $1.68 billion. Perennial is also divesting its 30 per cent stake in TripleOne Somerset to Shun Tak Holdings for $155.1 million.
“Most signs suggest that Asia-Pacific may already be at or near the bottom of the investment slump as of the end of the first quarter,” RCA said.
“Asia-Pacific economies are on the brink of reopening, which will aid real estate investors in their projections of future income streams. The record pipeline of pending deals, if completed, should also support investment momentum.”
But it noted that investment activity in 2020 will still likely end below last year’s near-record levels as travel curbs would have affected deal-making.