The 35-storey Grade-A office tower at 77 Robinson, which was recently refurbished, was put on the market for sale at $898 million or $2,925 psf based on net lettable area (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - The first four months of 2022 started with a bang and the office sector has been especially active, says Jeremy Lake, Savills Singapore managing director of investment sales and capital markets. “Asia as a destination remains very appealing,” he notes. “Singapore’s office market is something that most investors are keen to participate in and for good reason, because the fundamentals are compelling.”
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Capital market deals have rebounded strongly as investor confidence in Singapore’s outlook further improved in tandem with the reopening of the economy and the lifting of travel restrictions, says Regina Lim, head of strategic advisory, JLL Asia Pacific. “Investors are also encouraged by Singapore’s proactive and transparent approach to managing Covid, which has attracted more global companies to locate their regional headquarters in Singapore,” she adds.
An example is giant private equity firm KKR, which made its maiden acquisition in Singapore early this month. It purchased Twenty Anson at Tanjong Pagar precinct in the CBD, with the deal completed last Monday, according to the firm in a news release on April 18. It was KKR’s “first real estate office investment in Singapore”, says Tom Lee, the firm’s managing director of real estate.
KKR acquired Twenty Anson, its first real estate office tower in Singapore for about $598 million or $2,900 psf earlier this month (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Location map of Twenty Anson in Tanjong Pagar (Source: EdgeProp Inspector)
“We are optimistic about Singapore’s economic growth and the long-term prospects of its office real estate sector,” Lee comments. “Singapore continues to be a key part of our real estate strategy.”
KKR is said to have acquired Twenty Anson for about $598 million, or $2,900 psf based on net lettable area (NLA) of 2,06,163 sq ft for the 20-storey, Grade-A office tower. Completed in 2009, the building has 86 years left on its 99-year lease.
CBRE is said to have brokered the sale. The building is said to present opportunities in terms of a 13% uplift in gross floor area (GFA), especially in the common area on the first level. “This latest deal follows the recent spate of transactions in the CBD, where rejuvenation is taking place,” says Michael Tay, CBRE head of capital markets Singapore. “It shows investor confidence going beyond core assets.”
JLL assisted the seller, Boston-headquartered real estate fund manager AEW, in its divestment of Twenty Anson, which was transacted at a net yield below 3%. AEW had acquired Twenty Anson for $516 million in October 2018.
AEW divested 55 Market Street for $286.95 million in February this year, in a deal brokered by Cushman & Wakefield. The buyer was Japan’s Kajima Corp (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Location of 55 Market Street in Raffles Place (Source: EdgeProp Inspector)
In July 2018, AEW had picked up another office building in the CBD, namely 55 Market Street, a 999-year leasehold, 16-storey block in Raffles Place. The purchase price for 55 Market Street was then $216.8 million. AEW divested 55 Market Street for $286.95 million in February this year, in a deal brokered by Cushman & Wakefield. The buyer was Japan’s Kajima Corp.
For the first three months of 2022, investment sales jumped 134% y-o-y to $7.8 billion, estimates Ting Lim, JLL Singapore head of capital markets. The figure is also double the quarterly average in the pre-pandemic years of 2018 and 2019, implying 20%–25% y-o-y growth, says Lim.
Commercial property deals led the way, accounting for $5 billion or 64% of capital market deals in 1Q2022, says Colliers International in its latest investment report published on April 18. This represents a 157.8% q-o-q jump. “Investment was boosted by related party transactions, and a handful of office deals,” observes Melvin Chay, Colliers International director of capital markets and investment services. (Find Singapore commercial properties with our commercial directory)
One of the significant office deals currently underway is Robinson 77 (Photo: Samuel Isaac Chua/EdgeProp SIngapore)
Robinson 77 on Robinson Road is located within walking distance of the Tanjong Pagar MRT station (Source: EdgeProp Inspector)
Chay expects momentum to continue as investors hunt for stable-yielding assets. “In particular, office sales should go from strength to strength on the back of rising rents, tight supply, and as several assets become available,” he adds.
One of the significant office deals currently underway is Robinson 77. The expression of interest (EOI) exercise conducted by joint marketing agencies CBRE and Savills closed on April 18. The 35-storey, Grade-A office tower has a price tag of $898 million, or $2,925 psf based on net lettable area (NLA) of 306,929 sq ft.
There were offers from several parties, most of them believed to be real estate funds. The current owner of Robinson 77, Hong Kong-based real estate private equity firm Gaw Capital Partners, had purchased the property for $710 million in February 2019. The previous owner, CLSA Capital Partners, held the property for three years after acquiring it for $530.8 million in 2016.
Lazada One was put on the market for sale at $800 million ($3,077 psf), and a deal is believed to be imminent (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Lazada One (former Manulife Centre) is located at the corner of Bras Basah Road and Bencoolen Street (Source: EdgeProp Inspector)
Another office deal that is in the works is Lazada One at 51 Bras Basah Road. Last December, Lazada One had been put on the market for sale by EOI, with JLL and Savills as joint marketing agents. The indicative price is $800 million or $3,077 psf based on NLA of 260,000 sq ft, and according to Mingtiandi, a deal is imminent.
The 11-storey commercial building was jointly acquired by ARA Asset Management and British property group Chelsfield for $555.5 million in January 2019. Formerly known as Manulife Centre, the building was renamed Lazada One, after e-commerce platform Lazada, a subsidiary of Alibaba, along with the latter, took up 140,000 sq ft, which amounted to more than half the space in the building. Other anchor tenants in the building include co-working operator JustCo, music streaming provider Spotify and fashion e-retailer Zalora.
A $385.8 million green loan from DBS Bank and UOB was secured in 2020 to finance the acquisition and asset enhancement works, including incorporating sustainable features and smart technologies. The common area on the lower floors has been reconfigured to allow direct connection between Bras Basah MRT Station (Circle Line) and Bencoolen MRT Station (Downtown Line).
Lazada One is connected to both the Bras Basah and Bencoolen MRT stations (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Lazada One officially opened on April 20. It offers large contiguous floor plates of 24,000 sq ft, and amenities such as cafés, restaurants, convenience stores and a food court on the ground floor.
In the city area is Bugis Junction Towers, located at the corner of Victoria Street and Rochor Road. It is currently on the market for sale by private treaty. Cushman & Wakefield has been appointed the exclusive agency in the sale, but declined to comment on the deal.
US private equity group Angelo Gordon and Singapore real estate investment firm TCRE Partners purchased Bugis Junction Towers for $547.5 million from Keppel REIT in October 2019. Extensive asset enhancement works to the 15-storey office tower were recently completed, with the lobby and common areas upgraded. The NLA of the tower is 248,948 sq ft, with potential for further increase through conversion of multi-tenanted office floors to single-tenant floors. Offices are located from the fourth to 15th floors, with floor plates of 21,000 sq ft.
There are two F&B units on the first level, and basement parking for up to 640 cars. The building is linked directly to Bugis MRT Interchange Station for the Downtown and East-West Lines.
The exterior of Bugis Junction Towers, which is said to be on the market for $738 million, or $2,964 psf (Photo: Cushman & Wakefield)
Bugis Junction Tower is part of an integrated developnent that includes Bugis Junction, which is linked overhead to Bugis+, and InterContinental Singapore hotel as well as linked underground to the Bugis MRT Interchange station for the Downtown and East-West Lines (Source: EdgeProp Inspector)
The price tag for the Grade-A office tower is said to be $738 million, or $2,964 psf based its existing NLA. Bugis Junction Towers is currently 94.5% occupied, with the highest rental rate achieved in the building at just under $10 psf per month.
Enterprise Singapore is the anchor tenant at the office tower, occupying about 50% of the office space. According to market sources, Enterprise Singapore is currently paying a rental rate of just below $8 psf per month. This presents rental upside when the lease is due for renewal.
Another major tenant in the office tower is InterContinental Hotels Group, which operates the five-star InterContinental Hotel on Middle Road. The hotel is part of the integrated development that includes Bugis Junction Towers and Bugis Junction shopping mall, which is now linked to Bugis+ via a bridge and extends to Bugis Village. Collectively, they form Bugis Town, with over 600,000 sq ft NLA of retail space.
The lobby of Bugis Junction Tower after the asset enhancement exercise (Source: Bugis Junction Towers brochure)
The office market is hot right now, and Bugis Junction Towers is expected to appeal to institutional investors, such as property funds and pension funds that have been actively hunting for assets in Singapore.
For property funds, particularly those that are value-add in nature — who buy, upgrade and sell assets — “time is money,” says Savills’ Lake. “If they can turn around the asset and boost their returns, they will.”
Another deal that could surface on the market soon is 78 Shenton Way, an office development located in the CBD. Alpha Investment Partners had sold the building to PGIM Real Estate for $680 million in November 2018. CBRE and JLL are said to be the appointed marketing agents for the towers, one of 34 storeys, and the other of 11 storeys. They have a combined total NLA of 326,000 sq ft.
Another deal that could surface on the market soon is 78 Shenton Way, an office development located in the CBD (Photo: The Edge Singapore)
78 Shenton Way is located in the vicinity of Fuji Xerox which will be redeveloped into a new mixed-use development, the upcoming One Bernam mixed-use project and Anson House (Source: EdgeProp Inspector)
“The CBD has seen a lot of activity since last year, and it’s not just attracting the core, core-plus and value-add funds,” says Shaun Poh, Cushman & Wakefield executive director of capital markets. “We have seen developers looking for sites zoned for commercial use in the city area too.”
For instance, Chip Eng Seng, SingHaiyi and Chuan Investments purchased Maxwell House en bloc for $276.8 million in April 2021. Chip Eng Seng, SingHaiyi and KSH Holdings also jointly acquired Peace Mansion/Peace Centre en bloc in December 2021 for $650 million. (See potential condos with en bloc calculator)
The CBD incentive scheme has attracted property developers to explore redevelopment opportunities in the area, especially along Cecil Street and Robinson Road. “However, a lot of the stock has already been taken off the market,” says Poh. “And there are fewer of such opportunities available.”
Tanglin Shopping Centre was sold in February for $868 million to the Indonesian Tanoto family (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Tanglin Shopping Centre is located in the vicinity of the exclusive Tanglin and Nassim Road area (Source: EdgeProp Inspector)
In the neighbourhood of Orchard Road, the Tanoto family-controlled Pacific Eagle Real Estate acquired Tanglin Shopping Centre en bloc for $868 million in February. (See potential condos with en bloc calculator)
“The purchase of Tanglin Shopping Centre is a testament of the faith in Singapore real estate, not just for capital appreciation, but also wealth preservation,” says Desmond Sim, CEO of Edmund Tie.
Elsewhere, more owners of ageing commercial buildings are exploring a collective sale, for instance Katong Shopping Centre and City Plaza. Meanwhile, International Plaza was recently relaunched for sale at $2.7 billion, and Golden Mile Complex has received the highest offer of $700 million from a joint venture between Far East Organization and Perennial Holdings. Both properties are marketed by Edmund Tie. (Find Singapore commercial properties with our commercial directory)
Golden Mile Complex was put up for collective sale with the condition that it has to be conserved. Joint venture partners Far East Organiation and Perennial Holdings submitted an offer of $700 million, which is subject to consent from 80% of the owners (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Golden Mile Complex on Beach Road (Source: EdgeProp Inspector)
There are some investors who are also betting on decentralisation and looking to acquire prime office assets in the suburban region. In the Tampines regional hub in the east, the Grade-A office blocks at 7 and 9 Tampines Grande are expected to be rolled out for sale by EOI in the coming month.
Current owners, a joint venture between Evia Real Estate and Metro Holdings, had purchased the property for $395 million in April 2019. The asset has been renamed Asia Green. The pair of eight-storey office blocks have a total NLA of 287,596 sq ft. It has offices on the upper floors and retail units on the ground floor. Tenants include AIA, BNP Paribas and Hitachi Asia. The property has a balance of 85 years on its 99-year lease.
Cushman & Wakefield had brokered the sale of 7 and 9 Tampines Grande, on behalf of the previous owners, Alpha Investment Partners and City Developments two years ago. The real estate advisory firm is said to be involved in the upcoming sale by the current owners, although Cushman & Wakefield declined to comment.
Evia Real Estate and Metro Holdings, joint owners of Asia Green at 7 and 9 Tampines Grande is said to be putting the Grade-A office blocks on the market for sale in the coming month (Photo: Cushman & Wakefield)
Location of Asia Green at 7 and 9 Tampines Grande (Source: EdgeProp Inspector)
“There are investors who are looking for suburban retail and office assets,” says Poh. “They believe in the decentralisation play. But there are limited Grade-A office products in the suburban areas.”
No doubt, this year will see retail and office transactions continue to dominate capital market deals, says Lim of JLL capital markets.
While the Russia-Ukraine war has cast a pall on the global market outlook, it hasn’t had a material impact on demand for real estate assets in Singapore, notes Lim, head of strategic advisory for JLL Asia Pacific. “The concern is that geopolitical uncertainties have further disrupted global production and supply chains, pushing up inflation and interest rates”, she says. “Persistently high interest rates will likely impact investors’ required rates of return and slow asset price inflation.”
Check out the latest listings near Twenty Anson, Robinson 77, Bugis Junction Towers, 78 Shenton Way, Raffles Place, Manulife Centre, Maxwell House, Tanglin Shopping Centre, Katong Shopping Centre, City Plaza, International Plaza, Golden Mile Complex, Tampines Grande, Tanjong Pagar MRT station, Bras Basah MRT Station, Bencoolen MRT Station, Bugis MRT Interchange Station