Capital Market Deals Jump 40 2024 Bolstered Interest Rate Cuts

The total value of capital market property deals in Singapore is estimated to have reached $25.8 billion between January and November this year, according to Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield (C&W). This marks a 40.2% year-on-year increase from the $18.4 billion recorded in 2023. C&W defines capital market transactions as deals with values exceeding $10 million.

Wong notes that almost 60% of the capital market deals were transacted in the second half of 2024, driven by strong investor appetite and fueled by increased confidence in US Treasury interest rate cuts. Three deals worth over $1 billion were made in 2024, all of which were transacted in the second half of the year.

The highest-value transaction by absolute price was the sale of a 50% stake in ION Orchard mall for $1.85 billion to CapitaLand Integrated Commercial Trust (CICT) on September 3. The seller was CapitaLand Investment (CLI). The remaining 50% stake is held by Hong Kong-listed property developer Sun Hung Kai Properties.

Located in the heart of the shopping belt and directly linked to the Orchard MRT Station, ION Orchard is an eight-storey retail mall with a net lettable area of about 623,000 sq ft. It is home to over 300 international and local brands. On top of the mall is the 54-storey, 175-unit luxury condo tower, The Orchard Residences.

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The highest-valued office deal of the year was Mapletree Anson, which sold for $775 million in the second quarter of 2024.

A surge of investment in industrial assets was seen this year, with investments in the segment reaching $5.6 billion in just the first 11 months of 2024, a 174% increase from the previous year. The biggest deal in the industrial sector was the $1.6 billion divestment of a portfolio of seven properties in Soilbuild Business Space REIT to a joint venture (JV) between private equity firm Warburg Pincus and Australia-listed Lendlease Group in August. This portfolio consists of 4.5 million sq ft of business parks and specialist facilities across various industries.

Soilbuild Business Space REIT is controlled by global asset manager Blackstone and Lim Chap Huat, executive chairman of Soilbuild Group. This divestment was also the second-largest capital market deal in 2024.

The third-highest valued transaction of the year was the sale of two data centres to Singapore-listed Keppel DC REIT for $1.38 billion. These data centres, Keppel DC Singapore 7 and Keppel DC Singapore 8, are capable of large-scale data processing and are fully contracted to cloud services, internet enterprises, and telecommunications providers.

Wong notes that transaction volumes in the industrial sector are expected to hit a five-year high, reflecting high liquidity in the sector and investors’ favor for new economy assets such as prime logistics and life science assets.

Despite the unsuccessful sale of several Government Land Sales (GLS) sites this year, residential development sites sold via GLS tenders continued to form the bulk (42%) of total investment sales for the year.

Four GLS sites on the Confirmed List for 2024 failed to be awarded: the 6.5ha master developer white site in the Jurong Lake District (JLD); the 1.73ha white site at Marina Gardens Crescent; the 62,046 sq ft site at Media Circle fully zoned for long-stay serviced apartments (SA2); and a 262,875 sq ft site at Upper Thomson Road (Parcel A) that included an SA2 component.

Wong says the main reason for the unawarded sites was the tenders’ low bid prices, driven by site-specific concerns such as large land quantum or untested markets. Interest rate concerns and development risk exacerbated these factors.

However, CBRE’s Song does not anticipate the trend of unawarded GLS sites to continue in 2025, as the new sites on the Confirmed List are generally well-distributed and close to MRT stations and amenities.

Looking at the retail sector, Singapore recorded notable year-on-year growth in investment value, with deals involving retail assets reaching $3.3 billion, a 149% increase from last year. Investor interest in the retail sector has been rising due to steady operating fundamentals, notes Wong.

The office segment also showed signs of recovery, with an investment value of $2.37 billion recorded this year, a 15.7% increase from last year, bolstered by the normalization of return-to-office trends. CBRE also observed a narrowing price gap between buyers and sellers, supporting the recovery of office deals.

Conversely, the shophouse market saw a 49.7% year-on-year fall in investment value to $584 million, which CBRE’s Song attributes to dampened investor sentiments following the money laundering investigations in August 2023.

C&W’s Wong remains optimistic about seeing an increase in high-value deals next year, as the US Federal Reserve is expected to cut interest rates. He also points out that while overall borrowing costs are falling, they remain higher than pre-pandemic levels, and asset owners could bring more assets to the market as they seek to rebalance their portfolios.

CBRE’s Song expects institutional investors to return to the market, although a slower and lower-than-expected pace of rate cuts could slow down the recovery of capital markets. Barring any macroeconomic shocks, CBRE Research expects investment volumes to grow 10% from 2024’s volumes in 2025.