September 25, 2017

Sentiment in Singapore’s office market is starting to lift. After last year’s blockbuster deal involving the sale of Asia Square Tower 1 for US$2.5 billion, investors have once again taken notice as Blackrock sold Asia Square Tower 2 to Capitaland Commercial Trust for S$2.09 billion in the biggest office deal in the region so far this year.

Stuart Crow, Head of Asia Pacific Capital Markets for JLL who advised on the transaction on behalf of BlackRock Asia Property Fund III said that the sale is another example of buyers being increasingly attracted to mega deals in Asia.

“The sales process generated strong interest from major global investors and sends a clear message about the continued recovery of the Singapore office market,” he said, adding that there is likely to be further interest in the Lion City’s Grade A office assets after this deal as the market already shows signs of gaining pace.

Singapore’s office market had been languishing as rents in the prime financial district slumped by more than 10 percent over the past two years due to oversupply. But, with tightening supply and limited new developments in the pipeline until 2021, a turnaround is likely.

“Investors will be aware that we are at a point in the cycle where there is still the opportunity to get good value, but we expect prices to pick up in the coming quarters as supply starts to taper down between to less than one million square-feet in 2018 and no major office completions expected in 2019,” says Greg Hyland, JLL’s Head of Singapore Capital Markets.

There are other signs that a revival is within sight as CBD Grade A office capital values turned the corner in the last quarter, posting a “2.3 percent quarter-on-quarter growth after correcting 7.5 percent over seven quarters,” according to Crow.

Prior to the launch of Asia Square Tower 2, DBS sold the 28-storey PwC building to an indirect subsidiary of Manulife Financial Corp for S$760.60 million while GSH Plaza was sold to Hong Kong-listed Fullshare Holdings for S$725.21 million.

And with plenty of capital looking for value buys, Singapore’s current soft office market offers a safe bet, says Hyland.

“Investors’ confidence in Singapore’s office property market continues to be on the rise underpinned by the city state’s sound economic fundamentals.”

Click here to read more about real estate investment in Singapore and Asia Pacific


Greg Hyland

Head of Capital Markets, JLL Singapore

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