Property investments hit $10.2b as investors target tight office supply

The city recorded its lowest volume of office supply in a decade.

Overseas investors are racing for Singapore’s offices as rents and occupancies climb amidst a tight pipeline that saw the city record one of its lowest office supplies over the past decade.

The property sector enjoyed a colossal third quarter after investments surged 62% YoY to $3.54b (US$2.6b) for the period, pushing investment volumes to skyrocket 69% YTD to $10.2b (US$7.5b) for the first nine months of 2019, according to a report by capital market firm Real Capital Analytics.

“The office sector is especially attractive to overseas investors, as seen with Gaw Capital and Allianz Real Estate’s $1.5b (US$1.1b) purchase of the DUO office tower. Office supply is at some of the lowest levels seen over the past decade, whilst rents and occupancies have steadily increased over the past two years, fuelled by finance and tech sector occupiers. With new supply spaced out over the next three years, that trend will persist for some time,” said David Green-Morgan, RCA’s managing director for Asia Pacific.

Also read: Home, office property transactions up 90% in Q1

This is also the third consecutive quarter in which property investment volumes jumped more than 50% YoY. Whilst cross-border groups invested almost exclusively in trophy office assets, domestic players notedly spread their allocations across the office, industrial, retail and hotel properties, the report found.

Green-Morgan was cautious in correlating Hong Kong’s current crisis to the rise of investments in Singapore.

“Some observers may be tempted to see Singapore’s bumper year-to-date as a simple redirection of capital originally intended for Hong Kong. However, investment trends in Singapore have traditionally moved independently of – or even counter to – most of the major APAC economies. Even if there is a redirection of capital, it would take time to become visible through real estate investment,” he noted.

Also read: Singapore overtakes Hong Kong in cross-border commercial property investments in Q1

Global investors directed over $41.9b (US$30.8b) in capital to Asia Pacific, with India, China, Australia, Japan and Singapore each receiving over $1b in Q3.