Singapore’s Sun Venture Tries for Record Office Price as Market Rebounds

Singapore-based Sun Venture is aiming for a record price for a set of strata floors in the city’s urban core as investor demand returns to the financial hub.

The investment manager has put up for sale floors nine and 10 in Samsung Hub, a 999-year leasehold property at the heart of the Raffles Place central business district at an asking rate of S$104.88 million ($76.8 million).

Based on the 13,110 square feet (1,218 square meters) of space on each of the strata-titled floors, the asking price translates to S$4,000 per square foot, a record high for a Singapore office building, according to CBRE, the exclusive marketing agent for the property.

CBRE is seeking expressions of interest from buyers interested in picking up a slice of the 30-storey tower, with the pair of levels available as a pair or separately. The exercise will close on September 29.

Located on 3 Church Street, Samsung Hub is within five-minute’s walking distance of both the Raffles Place and Telok Ayer MRT stations. The building is about 90 percent leased out, with tenants including Samsung, foreign exchange trader Saxo Capital, energy consultancy Wood Mackenzie as well as serviced office operators JustCo and Regus.

Rare Strata Opportunity

“It is rare to find a 999-year strata building with such good specifications in Singapore, as only 10 percent to 15 percent of the CBD office buildings are strata titled,” said Michael Tay, head of Capital Markets at CBRE in Singapore. “Out of all these strata-titled office buildings, most are buildings which are either older, hold a 99-year lease tenure, have smaller floor plates or inferior specifications.”

Samsung Hub, which has a double-height entrance lobby and is fronted by a spacious drop-off approach, has experience setting pricing benchmarks for rare 999-year strata-titled office buildings in the Raffles Place CBD. In February this year, Sun Venture sold the 13,100 square foot 11th floor of Samsung Hub for S$49.78 million, translating to S$3,800 per square foot, in a deal that was also brokered by CBRE.

The proposed sale by Sun Venture comes as deal-making for commercial buildings within and around the Raffles Place CBD is starting to pick up after real estate investment in the Southeast Asian financial hub fell by more than two-thirds during the first six months of 2020.

Last week, Tuan Sing Holdings agreed to sell the Robinson Point office building near Raffles Place for S$500 million, or 34 percent over the property’s book value. Coincidentally, that Robinson Road office asset, which is about 10 minutes walk from Samsung Hub, had been sold by Sun Venture to the SGX-listed developer for S$348.9 million in 2013.

Sun Venture is among the most active investors in Singapore’s commercial properties. Just one year ago the developer and investor helmed by former Cushman & Wakefield executive Alvin Teo acquired the 15-storey 71 Robinson Road office building from Commerz Real for S$655 million.

Institutional investors have been seeking commercial properties in Singapore because of their stable rental income, prompting owners of some older office buildings in the Southeast Asian financial hub to put their assets up for sale.

Redevelopment Potential

Last month, financially troubled Pacific International Lines, Singapore’s largest container shipping company, put its office building near Raffles Place on the market for an indicative price of S$350 million.

During the same week,  property developer Fragrance Group made its 29-storey office tower near Tanjong Pagar available for purchase at an asking price of S$715 million.

The economic uncertainty brought on by the Covid-19 pandemic tempered office rents in Singapore in the first half of the year, however developers may be encouraged by the current market trend. Average office rents in the Raffles Place CBD stabilized in the second quarter after falling 0.8 percent in the first three months of the year, compared to October through December of 2019, according to a URA report last month.

Office rents are expected to recover from 2021 due to pent-up demand from the technology and biomedical sectors and the tight supply of new office space until 2023, CBRE’s Tay said.

Tight Office Supply

While URA data showed average office vacancy across Singapore climbing to 12.1 percent  in June from 11 percent in March, desk space is expected to remain tight in the next few years as tenants from office buildings earmarked for redevelopment, such as the AXA Tower and Fuji Xerox Tower in Tanjong Pagar search for new corporate homes, Tay said.

The 50-storey AXA Tower is being redeveloped by Perennial Real Estate after the developer secured government approval to boost the building’s gross floor area to 1.24 million square feet from 1.05 million square feet. Perennial and partner Singapore Press Holdings agreed to sell half of the building to Alibaba Group in May in a deal that values the property at S$1.68 billion.

Earlier this month, real estate giant City Developments said it had submitted plans to redevelop the 38-storey Fuji Xerox Tower office building in the Tanjong Pagar district and the seven-storey Central Mall office and retail complex on Havelock Road. Both properties can be granted higher plot ratios under the CBD Incentive Scheme and Strategic Development Incentive Scheme introduced by Singapore’s URA last year.

The government initiatives grant higher plot ratios for owners of commercial assets which incorporate residential and hotel components in redevelopment projects.

“We expect capital values to generally hold firm, although quality assets may continue to see constant growth through this period,” CBRE’s Tay said. “The resilience of the office market during this COVID-19 period will instil further confidence for investments in this sector. This should ensure growth in office capital value over the mid to long term.”