Capital Markets

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• Global commercial real estate (CRE) investment volume fell by 31% year-over-year in Q1 2021. A strong rebound is expected in the second half of the year on the back of economic recovery and widespread COVID-19 vaccinations.

• The pandemic has affected global investment markets to varying degrees. APAC led the global investment recovery in Q1. Markets like Tokyo, Seoul and Beijing showed resilience throughout the pandemic. Markets in North America, led by Los Angeles, Boston and Dallas, have recovered rapidly, while European markets lagged due to COVID resurgences.   

• Industrial property investment remained strong in all three global regions. Hotel investment gained traction in the U.S. as prices dropped and distressed sales came to market. Core office and retail assets held up well in Asia Pacific.

• Yield spread between property and bond narrowed based on rising bond yields across global markets. Global industrial yield continued to compress driven by strong market fundamentals and demand. Office yield remained stable in Q1 but showed signs of expansion in the U.S. Retail yield edged higher driven by softness in Europe.

• Real estate total return remained positive in 2020 thanks to a stable income return. Many investors are turning to opportunistic and distressed investment in 2021 for higher returns. Greater emphasis is placed on tenant credit and rent roll growth under the influence of the pandemic.

A GOOD START TO A YEAR OF EXPECTED ECONOMIC RECOVERY

• With the economy on the mend with positive news from the vaccine distribution, controlled easing of travel restrictions as well as the return of workers to their workplaces, investment sales activity picked up in the first quarter of the year, with the residential sector leading the string of deals. Investment deals amounted to some S$3.8 billion in Q1 2021, representing an uptick of 26.7% year-on-year (y-o-y) from S$3.0 billion in Q1 2020.

• The residential sector retained momentum with some S$1.7 billion of investment deals at the start of 2021. The Good Class Bungalow (GCB) segment continued to draw strong interest due to its rarified and coveted status, as well as the entry of more family offices setting up in Singapore. The sale of a GCB at Nassim Road for S$128.8 million or S$4,005 per square foot (psf) on land in late March broke all previous sales records from this asset class. At the same time, developers were beginning to replenish their land banks through partnerships.