Singapore is a prime new investor target, according to two reports from private equity real estate investment firms experienced in the region. But that news isn’t all good for the city-state. The opportunity is present because office and residential prices are believed to be near bottom.
Arch Capital Management said last week that Singapore is its new investment target, mainly because the city-state has “more price downward adjustment,” according to a statement from Arch CEO Richard Yue to the South China Post. Hong Kong is just beginning a price correction, according to the private equity investor.
LaSalle Concerned Over Office Pipeline
That assessment follows a similar tack by LaSalle Investment Management, which previously said that Singapore appears close to a bottom.
Elysia Tse, Head of Research and Strategy Asia Pacific for LaSalle Investment Management, said the Singapore office market will experience a “significant office supply pipeline” over the next 12 to 18 months, a situation that includes weak demand.
“The overall Singapore CBD vacancy rate is expected to exceed 10 percent in 2017, a level not seen since 2002,” said Tse. “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.”
Luxury Property Market Also Under Pressure
During that same period, demand for Singapore’s luxury residential properties is also expected to remain weak, Tse said, “if the government maintains (its) current stance on keeping with the property cooling measures. Additionally, the luxury residential supply pipeline is expected to put downward pressure on rents. This could lead to potential financial stress of some luxury residential developers and investors who have weaker financial balance sheets. Correction in the Singapore luxury residential market is also likely to present investment opportunities.
Just over a week ago, BlackRock and the Qatar Investment Authority (QIA) confirmed the sale of the Asia Square Tower 1 office building for a record S$3.4 billion ($2.45 billion). The US alternative investment manager and the Qatari sovereign wealth fund agreed to transact the 1.29 million square foot (120,000 square metre) LEED Platinum tower despite a downward slide in rents over recent months.
The deal was the largest single-tower real estate transaction in Asia Pacific to date, and the second largest single-tower real estate transaction globally, according to BlackRock.