– July 2020

MARKET IN MINUTES Investment Savills Research

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SINGAPORE Jeremy Lake Managing Director Investment Sales & Capital Markets +65 6415 3633 [email protected] Galven Tan Deputy Managing Director Investment Sales & Capital Markets +65 6415 3627 [email protected]

Circuit breaker halts investment activity RESEARCH Strict border controls have eff ectively shut down all incoming visitors, while all Alan Cheong Executive Director developers’ sales galleries were closed, and physical property viewings were not Singapore permitted for most of the second quarter. +65 6415 3641 [email protected]

• The real estate investment volume came in at S$2.14 billion • As Singapore entered Phase Two of its reopening on June Simon Smith for the second quarter, a 25.7% decline compared to the 19th, market activity is beginning to resume. We therefore Senior Director fi rst. expect deals to increase from the last quarter of 2020 as Asia Pacifi c time is required for negotiation, due diligence, etc. +852 2842 4573 • In Q2, investment sales in the residential segment fell by [email protected] 82.7% quarter-on-quarter (QoQ) to S$344.4 million and MCI (P) No. 017/08/2019 Company Reg No. 198703410D accounted for 16.1% of the quarter’s total investment sales. “While the desire to invest Savills plc Savills is a leading global real • Investment sales in the commercial segment reached estate service provider listed on remains strong, travel the London Stock Exchange. The S$1.56 billion, almost fi ve times the S$314.4 million company established in 1855, has a rich heritage with unrivalled recorded in the previous quarter. restrictions are disrupting the growth. It is a company that leads rather than follows, and now has over 600 offi ces and associates • The Singapore arm of Chinese e-commence giant Alibaba deal process.” throughout the Americas, Europe, Asia Pacifi c, Africa and the Middle Group has agree to acquire a 50% stake in AXA Tower in East. This report is for general ALAN CHEONG, SAVILLS RESEARCH informative purposes only. It may a deal which values the property at S$1.68 billion, making not be published, reproduced or quoted in part or in whole, nor may this easily the largest property sale so far in 2020. it be used as a basis for any contract, prospectus, agreement or other document without prior consent. Whilst every eff ort has • In Q2/2020, the industrial segment recorded S$235.3 been made to ensure its accuracy, million in investment sales, down 59.3% from the previous Savills accepts no liability whatsoever for any direct or quarter. consequential loss arising from its use. The content is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. savills.com.sg/research 1 Investment

MARKET OVERVIEW visitors and in-person property viewings Real estate investment sales in Singapore were prohibited. Nevertheless, there were still some bright GRAPH 1: Investment Sales Transaction Values, slowed down further in the second quarter Q1/2016 to Q2/2020 and came in at a total of S$2.14 billion for the spots in the market. There were two bulk three months from April to June, showing purchases of high-end non-landed residential Public sector Private sector a 25.7% decline from the S$2.88 billion units inked in the quarter, including 14 units 12 recorded a quarter ago. at Residences for about S$60.0 In order to prevent increasing local million and eight units at V On Shenton 10 transmission of COVID-19, the Singapore for about S$24.0 million. Both buyers are government has implemented a circuit foreigners, with the former coming from 8 breaker - a heightened set of safe distancing Mainland China. The market was of the view measures, such as the cessation of all non- that these buyers still see Singapore as a safe 6 essential business and activity, from April haven. 7th. Since then, all developers’ sales galleries S$ BILLION 4 have had to be closed and physical property COMMERCIAL viewings were not permitted for most of The commercial segment was the star 2 the second quarter. This dampened market performer and bucked the trend for the sentiment and during the period, put the quarter in review. In contrast to other 0 brakes on investment activity. Investors property types, the total tally of investment are still trying to digest the overall macro- sales in this segment reached S$1.56 billion, economic situation and the resultant impact almost fi ve times the S$314.4 million Q1/2017 Q1/2018 Q1/2016 Q1/2019 Q2/2017 Q3/2017 Q2/2018 Q3/2018 Q2/2016 Q2/2019 Q3/2016 Q3/2019 Q4/2017 Q4/2018 Q1/2020 Q4/2016 Q4/2019 Q2/2020 on the property market. Also, as a result of recorded in the previous quarter. Source Savills Research & Consultancy the outbreak, the authorities have extended In May, in a deal which values the property the public tender period for Government at S$1.68 billion, the Singapore arm of Land Sale (GLS) sites from the traditional Chinese e-commence giant Alibaba Group six to eight weeks to six months. Therefore, has agree to acquire a 50% stake in AXA GRAPH 2: Investment Sales Transaction Volumes By except for one industry site, there were no Tower located at in the CBD Property Type, Q2/2020 GLS sites awarded in Q2. from a Perennial-led entity comprising a consortium of investors. This is the biggest RESIDENTIAL property sale so far in 2020. Alibaba’s In Q2, investment sales in the residential Southeast Asia e-commerce platform, Lazada segment fell 82.7% QoQ to S$344.4 million is the anchor tenant in this 50-storey offi ce and accounted for 16.1% of the quarter’s development with a retail podium, taking total investment sales. As there were no up over 15% of the offi ce space. Following acquisitions of residential land in the completion of the transaction, Alibaba and Commercial reviewed quarter, Q2’s investment sales were the Perennial-led consortium will redevelop S$ 1.56 bil, Industrial 73% S$ 0.24 bil, all accounted for by sales of individual units. the property into a new integrated complex 11% From the caveats captured in URA’s with commercial, hotel and residential REALIS, there were only 17 luxury housing components. units (each S$10 million or more) transacted There were another two notable deals in the quarter. In April, Perennial Real Estate Residential in the second quarter. This comprised S$ 0.34 bil, eight landed houses and nine non-landed Holdings sold its remaining 30% stake in 16% units. The number was 58.5% less than the 111 Somerset, a 17-storey newly refurbished 41 recorded a quarter ago. The drop was commercial complex in the Orchard Road attributable to the lockdown as strict border precinct, to casino magnate Stanley Ho’s Source Savills Research & Consultancy controls eff ectively shut down all incoming Shun Tak Holdings. Following the purchase,

TABLE 1: Top Private Investment Sales, Q2/2020

PROPERTY SECTOR TRANSACTION DATE PRICE (S$ MILLION) BUYER

AXA Tower (50% stake) Commercial May 2020 840.0 Alibaba Group Holding Limited at 8 Shenton Way

111 Somerset (30% stake) Commercial Apr 2020 342.0 Shun Tak Holdings Limited at 111 Somerset Road

Retail & commercial strata lots at Commercial Jun 2020 315.0 Siriti R Pte Ltd and Siriti C Pte Ltd 30 Raffl es Place

DWS, Deutsche Bank’s asset 11 Sunview Way Industrial May 2020 75.0 management arm

Luxasia Building Industrial May 2020 66.1 TBA at 12 Tai Seng Street

Source URA, Savills Research & Consultancy savills.com.sg/research 2 Investment

the latter will have 100% ownership of the as the advent of 5G, work from home, wider use is forcing them to restructure operations. A few property. Based on the property’s valuation, the of video conferencing and e-commerce ratchets properties, especially commercial / mixed-used 30% stake works out to S$342.0 million. Later up demand for such industrial properties. developments (e.g. PIL Building, ABI Plaza and in June, Oxley Holdings offl oaded the retail and For examples, DWS, Deutsche Bank’s asset Tower Fifteen), have been put up for sale in the last banking podium of its Oxley At Raffl es (former management arm announced the acquisition few weeks. However, there is likely to be a price gap ) in Raffl es Place for S$315.0 of a warehouse asset at Sunview Way in Jurong between buyers and sellers which will take some million, comprising S$192.7 million for the retail for about S$75.0 million in May. The 403,000 time to resolve. strata lots at levels B2, B1, one and two, and S$122.3 sq ft property comprises a four-storey ramp-up Although remaining cautious, there are million for commercial lots on levels three, four warehouse and ancillary offi ce space and serves as numerous investors holding cash who are ready to and fi ve. The buyer is reported to be an entity the APAC headquarters for its sole tenant, NYSE- buy in the prevailing low interest rate environment. linked to Saudi Arabia-based Olayan Group. listed 3PL operator XPO Logistics. Separately, a As Singapore and Hong Kong have traditionally These three big-ticket deals made for a strong joint venture of Singapore Press Holdings (SPH) been hubs for private equity companies, those who showing for the commercial sector in the reviewed and Keppel Data Centres Holdings acquired a have a presence here may still be able to conduct quarter. However, it was noted that deals such as leasehold interest at 82 Genting Lane for S$50.0 due diligence work. It will be those who do not AXA Tower have been in the works for some time million to develop and run data-centre facilities have a presence who will struggle to close. Until and 111 Somerset is an internal transfer. there. the hassle of travelling is substantially reduced, which we assume to be quite some time away, the INDUSTRIAL OUTLOOK deal machine will only be accessed by investors In the second quarter, the industrial segment As Singapore entered Phase Two of its reopening represented here. We therefore expect deals to recorded S$235.3 million in investment sales, on June 19th, market activity should begin to increase from the last quarter of 2020 as time is plunging by some 59.3% from the previous quarter. resume. Thus far, there have been no distressed required for negotiation, due diligence, etc. The Buying interest in logistics facilities and data sales. However, there are motivated sellers who full-year investment sales value could range from centres has increased further after the pandemic, want to dispose their real estate as the pandemic S$9 billion to S$11 billion.

savills.com.sg/research 3