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After two years of falling rents caused by a glut of supply and a sluggish economy, the promise of a bottom in the city-state’s office market pushed its ranking up from next-to-bottom last year to third in this year’s Emerging Trends in Real Estate Asia Pacific 2018 report.
“This position is reassuring for Singapore’s investment prospects, given that we have major projects in the pipeline to transform our city, such as the development of Jurong Lake District as an exciting second Central Business District, and the doubling of capacities of both our air and sea ports,” said Khoo Teng Chye, Chairman of the Urban Land Institute (ULI) Singapore, and Executive Director at Centre for Liveable Cities.
Jointly published by PwC and ULI, the report noted that office rents in Singapore firmed earlier than expected, while the completion of Asia Pacific’s biggest office deal in September 2017 galvanized the local market as well as set a floor for valuations. A number of core office transactions have also taken place this year, with foreign funds buying actively.
The residential sector also showed signs of recovery, with increasing transactions and a slight improvement in pricing. Sales of developer sites soared amid tightening supply as developers look to replenish their land banks.
“The rebound seems likely to be sustainable, given several years of pent-up consumer demand. The Chinese developers have also been active in buying land, pushing up land auction prices for residential sites significantly through 2017,” noted the report, which is based on the opinions of over 600 real estate professionals, including developers, investors, lenders, property company representatives, brokers and consultants.
However, other respondents believe that talk of a bottoming in the office market is premature.
“Singapore’s still in a difficult place. They don’t have a lot of business confidence, there’s quite a lot of supply and not a huge amount of expansion,” said a fund-manager active in the market.
“It’s challenging to bring foreign workers in because the government has responded to local concerns to protect jobs, and at the same time, a lot of the European banks are downsizing, which hits demand for space. I don’t want to be negative, but we’re not seeing a big pipeline of deals that interest us.”
This article was edited by Keshia Faculin.
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