Published October 10, 2008

Q3 property investment sales plunge 79% to $1.1b

Activity set to stay low for rest of '08; asset pricing now more 'realistic': DTZ

By ARTHUR SIM

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INVESTMENT sales in the third quarter totalled just $1.1 billion, a dizzy 79 per cent slide from the second quarter, according to DTZ. And most deals in Q3 were small, at less than $100 million each, due to 'credit tightening'.

Investment activity is expected to stay low for at least the rest of this year. But DTZ senior director (investment advisory services and auction) Shaun Poh said: 'Assets are now priced more realistically and there are funds looking for opportunistic purchases, in particular distress sales.'

Still, he said that deals are likely to be small, at less than $200 million, and mostly from private equity.

In Q3, Kuwait Finance House acquired 36 apartments at Goodwood Residences for about $2,800 per square foot.

The retail property market also slowed in Q3. 'Gross fixed rents remained unchanged for three consecutive quarters, a sign of a peaking market,' DTZ said.

Average prime first-storey monthly rents came to $42.40 psf in Orchard/ Scotts Road, $27.10 psf in other city areas and $33.70 psf in suburban areas.

DTZ associate director Anna Lee said that retail property prices and rents would come under pressure in 2009 when there is a spike in potential supply. 'For the rest of 2008, rents are expected to hold firm with little new supply and Christmas around the corner.'

Separately, CB Richard Ellis (CBRE) said that rents for factories and warehouses edged up or stayed flat in Q3.

'The bright spot was the high-tech sector, which showed a strong 9.5 per cent quarter-on-quarter increase in monthly rent,' it said.

Monthly rent for high-tech space increased 9.5 per cent from Q2 to $3.45 psf in Q3, driven by rising numbers of qualifying office tenants.

'An active pre-letting market for business park space was observed, especially among financial institutions,' said CBRE.

The average monthly rent for factory space rose 3.2 per cent from Q2 to $1.60 psf for ground-floor units and 3.8 per cent to $1.35 psf for upper-floor units. The average monthly rent for warehouses stayed flat at $1.55 psf and $1.25 psf respectively for ground and upper-floor units.

The average capital value of 60-year leasehold strata-title factory units edged up about 2.3 per cent from Q2 to $309 psf and $225 psf respectively for ground and upper-floor units. The average capital value of freehold warehouses held firm during at $458 psf for ground-floor units and $401 psf for upper-floor units.

CBRE director for industrial and logistics services Bernard Goh said: 'While rents for factories and warehouses are not expected to show significant movements, high-tech and business park space is expected to continue on a moderate upward trend.'