Market watchers expect more commercial and industrial listings at property auctions

SINGAPORE: More commercial and industrial properties are likely to come up at property auctions this year amid a challenging business climate. 

This comes as owners and investors look to dispose of their underperforming assets, said market watchers. 

They added that with more options during the monthly property auctions held by real estate agencies, some investors are keeping a close watch for good commercial units that may yield solid rentals and profits. 

LOOKING OUT FOR GOOD DEALS

These are usually properties that are being let go by businesses in distress, or units that have not found a buyer on the open market.

Property investor Daryl Ng and his partners, for instance, bought a 990 sq ft commercial unit at the Textile Centre in Jalan Sultan from the open market three years ago for around S$1 million (US$0.75 million). The unit can be used either as an office or retail space.

They are now renting it out to two tenants for a total of S$4,500 monthly.

Mr Ng, who is constantly on the lookout for such good deals during property auctions, cited the facing orientation, footfall and usage of the units as factors that investors look at. 

“If these three tick boxes are there, we don't mind giving a good market price,” he said. “But let's say it doesn’t match the tick boxes, we will offer maybe a 10 to 15 per cent difference (from the selling price) and see how it goes.”

RECOUPING CAPITAL

Real estate consultancy Knight Frank Singapore said a total of 360 properties were up for sale last year at the auction market. Residential properties formed more than a quarter of these listings. 

About 240 properties were owner listings, which are properties put up by the owner rather than the bank.

Of all the properties listed, about 7 per cent were eventually sold, which is considered historically typical for the auction market. More than half of those sold were industrial properties.

Knight Frank Singapore is expecting a slightly higher success rate of up to 10 per cent this year. 

“There'll be listings from all sectors, we expect, particularly in the commercial and industrial sectors,” said Mr Leonard Tay, head of research at Knight Frank Singapore. 

“The tight business environment that prevailed in 2023 might have proved too challenging for some business owners, and this could possibly result in an offloading of these assets this year to recoup some capital.”

The recycled capital can then be used for new investments this year, “especially so if opportunities present themselves where prices have trended downwards towards more realistic levels”, said Mr Tay. 

CASHING OUT ON RESIDENTIAL PROPERTIES

Property auctions typically have a mixture of different asset types, with the bulk of the listings being residential homes.  

But with a healthy rental market, some home owners enjoy strong rental yields and may not have an urgency to sell their residential properties, said observers. 

But other home owners, especially those who bought residential homes before the COVID-19 pandemic, may consider cashing out on their properties, given that home prices have been rising over the last few years, said real estate auctioneer Joy Tan. 

“This could be because many home owners who previously secured attractive, fixed rates may have to relook at their loan refinancing this year,” said Ms Tan, executive director of auction and sales at real estate consulting firm Edmund Tie. 

“And given the higher interest rates, this could create some selling pressure in the market.”