Investors To Seek Office Assets In Markets With Limited Future Supply
SINGAPORE – The city-state’s office property sector is “well-placed to benefit” from the trend, in which investors gravitate towards markets with limited future stock, according to an article written by JLL Singapore that was posted on The Business Times on Thursday morning (19 November, SGT).
“We expect the current uncertainty over office demand post-COVID-19 to steer investors towards gateway cities with lower upcoming supply for a wider margin of safety,” wrote the property consultancy’s Head of Research & Consultancy, Tay Huey Ying.
From 2020 to 2024, Singapore’s investment-grade office stock at its central business district (CBD) is projected to increase at a sluggish pace of 600,000 sq ft per year, which is only about 50 percent of the annual average net absorption of 1.2 million sq ft over the past 10 years.
This limited upcoming office inventory “should buffer the sector well against the impact of any potential increase in the adoption of work-from-home practices by occupiers,” she noted.
Tay attributed the slow supply growth to the limited land supply in the CBD for new office projects, as well as the redevelopment of old office buildings that has been partly driven by the CBD Incentive Scheme.
Notably, the scheme grants bonus plot ratio when owners of office properties redevelop their assets into mixed-use projects.
Furthermore, monthly rents of office space in the CBD are forecasted rebound by 25 percent to 30 percent by 2024 after hitting its trough in 2021.
“Singapore’s attractive propositions as a gateway hub for the region would also enable it to continue drawing more corporations to set up bases here. This will provide support for demand for office space and keep vacancy tight,” she noted.
Despite the ill effects of the COVID-19 outbreak to the commercial property segment, Tay also pointed out that Singapore still witnessed note-worthy transactions during the first 3 quarters of this year.
These include Tuan Sing Holdings’ proposed sale of the Robinson Point office tower for S$500 million, which set a record-breaking en bloc unit sale price of SS$3,736 psf based on its net leasable area. Another is Alibaba’s acquisition of a 50 percent interest in AXA Tower along Shenton Way for S$840 million.