Singapore office rents are on their way down, but that could be good news for property investors shopping for bargains in southeast Asia’s financial capital. CLSA Capital Partners is the latest to decide it’s time to get back in the Lion City market, and the asset management arm of CLSA went back to some familiar turf in buying a 35-storey office tower on 77 Robinson Road in downtown Singapore last week for S$530.8 million ($373 million).
CLSA Capital Partners should know this particular asset well, as a fund managed by the Hong Kong-based firm had sold the former Singapore Airlines headquarters to SEB ImmoInvest in 2007 for S$526 million ($369.7 million). SEB was acquired by Savills Investment Management just over one year ago.
In its earlier term running the circa 1998 tower, CLSA had taken a quick profit of S$183 million, just 10 months after buying the 293,269 square foot (27,245 square metre) tower from Singapore Airlines in June of 2006 for S$343 million ($241 million).
Experts told The Business Times that a number of enhancements could be made by the new owners to add value to the complex, including converting some of the car park into commercial space, as well as reconfiguring the main entrance lobby.
There Goes The Neighborhood
CLSA’s decision to reacquire the downtown asset is the latest in a flurry of Singapore office deals.
In the ten minutes it would take to get from the 77 Robinson Road building to the Downtown MRT station on foot, you would pass nearly $7 billion worth of completed or potential commercial transactions in 2016.
In June of this year, BlackRock raked in a record setting $2.45 billion when it sold Asia Square 1 to the Qatar Investment Authority. The sale of the 1.29 million square foot (120,000 square metre) office property is the largest single-tower real estate transaction in Asia Pacific to date.
Perhaps buoyed by that success, the world’s largest asset manager is said to have put out feelers to potential buyers to gauge interest in acquiring the 72,845 square metre Asia Square 2 with bids for the tower expected to be around S$2 billion ($1.4 billion).
And across the street from Asia Square, Malaysia’s IOI Properties Group earlier this month led all bidding with a S$2.6 million ($1.8 million) offer that landed a 10,869 square metre commercial site in the financial district.
As Office Rents Bottom Out, Investors Return To Singapore
The string of recent commercial transactions comes at a time when Singapore’s skyscrapers saw a decline of seven percent in office rents during the first half of the year with both significant new supply scheduled to come on line and a slowdown in the local economy.
The recent Knight Frank Global Cities report noted that this downturn looks set to continue with office rents predicted to decline 14 percent between the fourth quarter of 2015 and the end of the decade. However, the less than rosy outlook allowed investors to jump back into the market.
“The overall Singapore CBD vacancy rate is expected to exceed 10 percent in 2017, a level not seen since 2002,” Elysia Tse, Head of Research and Strategy Asia Pacific for LaSalle Investment Management, said earlier this year. “The supply/demand dynamics are expected to continue to put downward pressure on rents. The potential market correction presents opportunities to acquire prime office assets in CBD areas of Singapore.”