Rise in value of office space in Singapore is highest in the world

From Straits Times – July 20, 2007:

By Fiona Chan, Property Reporter

SINGAPORE’S office buildings have shot up in value by more than anywhere else in the world over the past year.

These soaring values, as well as a rush of investment capital into Singapore, have made the property market here the world’s hottest.

This was revealed by property firm Jones Lang LaSalle (JLL) earlier this week, ahead of a fuller report on global real estate investment due out next month. It will track property deals above US$5 million (S$6.5 million) worldwide, most of which involve commercial real estate, such as offices and shops.

JLL’s head of Asia capital markets, Mr Stuart Crow, elaborated on the preliminary findings yesterday.

He told The Straits Times that capital values of property in Singapore, particularly offices, have risen the most in the world in terms of a straight monetary increase rather than a percentage rise.

In the prime Raffles Place area, office values rose by US$804 per sq ft (psf) in the last 12 months, boosted by a supply crunch and soaring rentals. This is more than double the increase in Hong Kong’s central district, where offices rose about US$280 psf in value on average, he said.

In percentage terms, Singapore’s office values jumped a staggering 105 per cent in a year to reach $1,568.50 psf last month.

In Hong Kong, values rose only 16.7 per cent in the same period to hit US$1,958.60 psf. But Mumbai’s growth beat Singapore’s in percentage terms – up 123 per cent to US$1,166.20 psf.

Office values in Singapore have been driven up by an acute supply crunch as well as soaring demand from expanding businesses. But some experts have warned that rising office prices and rent could hurt the Republic’s competiveness.

The surge in real estate values here has also been boosted by buzzing investor interest in Singapore, said Mr Crow.

In the first half of this year, US$3.7 billion worth of real estate changed hands here – a 40 per cent jump from a year earlier and the fourth highest figure in the Asia-Pacific region, behind Japan, Australia and China.

Mr Crow believes property investments here will double in the next six months to reach about US$8 billion for the whole year. ‘We’re still in the early stages. Next year, investment flows may strengthen even further.’

He said many new foreign players have arrived in Singapore’s real estate market, adding that it has been transformed from an ‘opportunistic’ destination to a ‘core market’.

Of the last 18 major office transactions in Singapore, 16 have involved foreign buyers, noted Mr Crow. About 11 of these were making their first acquisition in Singapore; for some, their first in Asia.

British-based property fund Develica, for one, bought its first Asian building last month, 1 Finlayson Green, for $231 million.

fiochan@sph.com.sg

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