Category Archives: Singapore Office

Singapore offices ‘expensive’ compared to Australia and Japan: Union Investment

Singapore’s office market is expensive compared with Australia and Japan because of a space glut and slowing rental growth, according to Union Investment, Germany’s largest fund manager.

Office rents peaked in the first quarter as the city- state’s economic growth shows signs of tapering, according to Cushman & Wakefield. Grade A office rents in the central business district could slide 14 per cent over the next two years to S$9.12 per square foot per month from S$10.60 per square foot, Cushman estimates.
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“It’s positive because of the quality of assets, maturity of assets, transparency of markets for practical reasons, but for economic returns it’s less attractive at this point in time,” Mr Eric Cheah, Asia-Pacific head of investment management at Union Investment, said in an interview in the city-state.

Union, which has one office asset in Singapore, is increasing its bets on central district offices in Australia and Japan instead, Mr Cheah said.

Rents in Singapore’s central business district jumped 14 per cent last year, posting the biggest increase in the region, according to Jones Lang LaSalle.

Overseas sales unexpectedly fell for the first time in three months last month, signaling a weakening growth outlook for the export-dependent nation. Consumer prices prices declined for a sixth straight month in April and employment contracted last quarter for the first time since 2009.

BLACKROCK’S PROPERTY

Some landlords are considering selling their properties. BlackRock, the world’s largest asset manager, said it has received expressions of interest for Singapore’s Asia Square Tower 1 and could get more than S$4 billion for the building whose tenants include Citigroup. The fund hopes to close the deal by the end of the year, he said.

BlackRock may also look to sell Asia Square Tower 2, Mr Greg Lapham, a real estate managing director at the firm, said in an interview at the Real Estate Investment World conference in Singapore yesterday.

Keppel Land’s investment company is also planning to sell its 50 per cent stake in Capital Square, a 16-storey building in Singapore’s financial district.

The divestments will come as supply increases. Over the next four years, 8 million square feet of office space and more than 3 three million square feet of business park space will become available, according to Cushman.

The Singapore property index tracking 49 real estate companies dropped 0.5 per cent as of 9.19AM, set for the lowest in three months.

POLICY RISK

“The Singapore office user has never been so spoiled for choice; the question that investors are grappling with is what will trigger growth in the medium term to drive take-up of this huge supply,” said Singapore-based Priyaranjan Kumar, regional executive director of capital markets at Cushman.

Tokyo, Sydney, London, New York, San Francisco and Boston currently offer either better spreads or clearer evidence of near-term growth, Mr Kumar said.

The Singapore government’s control of land supply will keep rents from surging, Mr Cheah said.

“There is an element of policy risk in Singapore in terms of its pro-business support to keep rentals in check so they don’t get to too high levels,” Mr Cheah said. “There is the opportunity for them to just release more sites so they can keep a certain ceiling on rentals.”

Union Investment, which oversees 240 billion euros (S$364.2 billion) globally with about 29 billion euros in real estate assets, plans to double its property investments in the Asia-Pacific region to 2 billion euros over the next three to five years, Mr Cheah said.

The fund has 10 properties in Tokyo and may look for office assets in Osaka, he said. It will also scout for opportunities in Australia where it currently has one asset in Brisbane in Queensland state, he said.

“We will always keep an eye on Singapore, but from a returns perspective there is not that much opportunity around,” Mr Cheah said.

Source : Today – 18 Jun 2015

BlackRock may sell Asia Square Tower 1 for over S$4b: Bloomberg

The owner of Asia Square Tower 1 may sell the building for more than S$4 billion after receiving expressions of interest from potential buyers. This is according to Bloomberg, which quoted BlackRock real estate managing director Greg Lapham in a report dated Jun 17.

BlackRock, which also owns Asia Square Tower 2, hopes to close the deal by the end of the year, Lapham said. Asia Square Tower 1, which is located in the Marina Bay area, has around 1.2 million square feet (sq ft) of office space and about 40,000 sq ft of retail space. Its tenants include Citigroup, Swiss private bank Julius Baer and Google.

The sale of tower one could be a club deal, in which several investors bid together, Lapham said. Asked to comment on the report, a BlackRock spokeswoman described Asia Square as a trophy grade-A office building in Singapore.

“The nature of this asset is that it regularly attracts attention and we continually assess the market for the best outcomes for our tenants and investors,” she said.

Source : Channel NewsAsia – 18 Jun 2015

OUE C-REIT to buy into One Raffles Place

OUE Commercial REIT on Wednesday (Jun 10) announced its plans to buy into One Raffles Place, in its maiden acquisition since its initial public offering in January last year.

Under the deal, OUE Commercial REIT plans to buy a stake of between 75 per cent and 83.33 per cent in OUB Centre Limited, which owns One Raffles Place. OUB is the registered owner of the property and it owns 81.54 per cent of the beneficial interest in the property.

This will give the REIT an effective interest of between 61.16 per cent and 67.95 per cent in One Raffles Place.

The agreed value for the acquisition is expected to be between S$1.28 billion and S$1.43 billion. Depending on the stake acquired, the purchase consideration is expected to be between S$1.0 billion and S$1.15 billion.

OUE C-REIT is seeking to strengthen its position within the Singapore office market. Following the deal, its assets under management is expected to increase from S$1.6 billion as at Dec 31, 2014, to S$3.4 billion.

Located in the heart of Singapore’s Central Business District, One Raffles Place is an integrated commercial development comprising two Grade-A office buildings and a recently refurbished retail mall – One Raffles Place Shopping Mall.

Source : Channel NewsAsia – 10 Jun 2015