Consider Gov’t Plans Before Making Office Investments, Says KKR & AEW
SINGAPORE – Jeremy Chee, a Principal with the property team of KKR, said it’s important for real estate investors seeking value-add properties to be cognisant of the authorities’ plans for new urban centres as well as plans to breathe new life into certain areas reported Mingtiandi on Tuesday evening (25 October, SGT).
Citing the Punggol Digital District that will start opening from 2024, Chee shared several factors in identifying potential commercial property hotspots across the city-state.
“We look at a couple of things: tenant demand, nearby amenities, and exit liquidity,” he said during the recent Mingtiandi Singapore Forum.
Adrian Lee, Head of Singapore investments at AEW, concurs that commercial property investors should be aware of the government’s plans. Following the success of commercial hubs like Changi Business Park and Marina Bay, the local authorities have been supporting decentralization by constructing new transit lines such as the Cross Island Line and the Jurong Regional Line.
“With that government support and infrastructure going in, we see relative value in investing into well-located Grade A offices in the decentralized locations. And there’s a scarcity factor over there – there’s just a handful of decentralized office in Singapore. While we may not be able to generate as high a rental growth or rental reversion as CBD offices, but the macro theme is still there and we’re very positive on that,” he explained.
AEW has acted on this market observation by reducing its holdings in office properties in Singapore’s central business district in favour of office assets emerging commercial hubs.
In June 2022, Lee’s team acquired the Westgate Tower in Jurong East from local investment company Sun Venture for S$680 million. That acquisition came after the Boston-based fund manager divested the Twenty Anson office building to KKR for S$599 million in April of the same year.
In February 2022, AEW also unloaded the 55 Market Street office tower near Raffles Place to Kajima Corporation for S$287 million.
However, Savills Singapore’s Managing Director of investment sales & capital markets Jeremy Lake expects real estate investment would slow down.
“I don’t think Singapore is immune to the issues which we see in other markets around the region, with the substantial increase in interest rates.”
Besides government sales of vacant land, he expects the rising borrowing costs to discourage property investment in H2 2022. “Probably through the rest of the year we won’t see much happening as the outlook for interest is still uncertain.”
