AEW Selling Office Tower in Singapore’s Raffles Place To Kajima For $213M

Global fund manager AEW is selling a 16-storey office block in Singapore’s Raffles Place to a unit of Japanese construction and real estate firm Kajima Corp for S$286.9 million ($213.4 million), as global investors continue to target Singapore office assets.

AEW and Kajima signed a sale and purchase agreement for the 999-year leasehold building at 55 Market Street earlier this month and are expected to close the transaction next week, according to sources familiar with the deal who spoke with Mingtiandi.

Following completion of the deal, which was first reported by the Business Times, Kajima is said to be planning upgrades of the tower, which underwent a significant refurbishment in 2019, and has struggled to fill its 83,000 square feet (7,710 square metres) of space as Singapore has weathered extended work-from-home orders.

Less than two months into 2022, AEW’s sale marked the fourth major office deal in Singapore this year as institutional investors continue to favour the city-state’s growing tech and finance sectors and remain sold on its long-term stability.

Commercial Expansion

Designed with 14 floors of office space above a two-storey retail section, Kajima is paying just less than S$3,457 per square foot of net lettable area in the building across the street from CapitaLand’s newly completed CapitaSpring project.

On a price per square foot basis, AEW is selling the property for around 13 percent more than it had paid to acquire the 2006-vintage asset when it purchased 55 Market Street from SGX-listed Frasers Commercial Trust for S$216.8 million in 2018.

As part of its enhancement of the building, which occupies a 6,575 square foot site just a few steps from Raffles Place MRT, AEW had reconfigured the layout to add more than 11,200 square feet of net lettable area, with occupiers primarily made up of local professional services firms and other service providers. Its tenants also include boutique gym Primefit Singapore and private investment advisory firm Chancery Asset Management.

AEW and Kajima did not respond to queries from MIngtiandi by the time of publication while Cushman & Wakefield, which is understood to have brokered the deal, declined to comment.

Aiming to Upgrade

MIngtiandi understands that Kajima, which is one of Japan’s best known construction firms, intends to make significant upgrades to 55 Market Street to keep the property aligned with rising tenant expectations for quality workplaces.

CapitaSpring, which was completed late last year with amenities like a sky garden, is already 93 percent occupied by tenants including JP Morgan, Sumitomo Mitsui Banking Corporation, JLL, Squarepoint Capital and White & Case as tenants angle for prime buildings amid increasing competition for talent.

Kajima’s latest trophy asset adds to a portfolio of Singapore projects which already includes the billion-dollar Woodleigh Residences integrated project it is currently developing alongside Singapore Press Holdings in Bidadari, in the central region.

For AEW, the Raffles Place disposal comes as the US fund manager has reportedly been marketing another Singapore office tower which it purchased in 2018. The firm had paid S$516 million for 20 Anson and was rumoured late last year to be discussing a potential deal with Gaw Capital Partners.

In September last year AEW closed its fourth Asia Pacific value-add fund having raised $1.54 billion in total commitments to support its projects across major cities in Singapore, Australia, China and Japan.

Tech, Flight To Quality Drive Office Demand

AEW’s Raffles Place sale follows a string of major office deals in Singapore this year, including TE Capital Partners and LaSalle Investment Management’s S$324 million joint acquisition of the PIL Building on Cecil Street, which closed last week.

Also last week, Lendlease Global Commercial REIT acquired the remaining stake in Jem – a commercial project in Jurong East – from funds managed by Lendlease in a S$2.08-billion purchase.

In another deal near Raffles Place, the Cross Street Exchange found a new owner last month after private equity firm PAG agreed to buy the commercial complex from Singapore-listed Frasers Logistics & Commercial Trust for S$810.8 million.

Driving these deals is a rising optimism concerning Singapore’s office market, especially in the prime segment, where supply remains low while multinational tech firms drive demand according to Wong Xian Yang, head of research for Singapore at Cushman & Wakefield.

“Office demand is fueled by the tech and finance sectors which were not badly affected by the pandemic and have continued to expand,” Wong said. “The large tech companies such as Bytedance and Amazon, are on a hiring spree and they are increasing headcounts in the hundreds and this would translate into increased space requirements.”

Wong estimated Singapore CBD grade A office rents will rise by 4.6 percent this year to set the highest growth among core APAC markets.