Hong Kong and China investors put over $2 billion into Singapore office assets in first half of 2017

Southeast Asian property is hot.

A new report by professional services and investment management company JLL revealed that commercial transactions in Singapore were dominated by Hong Kong groups in the first half of 2017.

According to the data, Singapore picked up over US$2.2 billion of investments into office assets, and over US$1.45 billion into residential land from Hong Kong and China investors in the 1H2017.

Office investments include FWD Insurance taking a 50% stake in One George Street; Hongkong Land’s investment in a 33% stake in the Central Boulevard site; and other Hong Kong and China investors’ acquisitions of Tripleone Somerset and GSH Building.

FWD Insurance bought a 50% stake in the One George Street building in May this year.
Lianhe Wanbao

Nanshan Group and Logan Property Holdings also invested over S$1 billion in a government land sale site at Stirling Road; while MCL, a subsidiary of Hongkong Land, paid S$766 million for an enbloc redevelopment site in Eunos.

Real estate transaction volumes in Singapore rose by 6% year-on-year in the first half of the year, as investor sentiment turned positive after CBD office rents bottomed earlier than expected, the report said.

“Singapore remains a key market for many investors due to its long-term positive fundamentals,” Regina Lim, JLL’s head of capital markets research in Southeast Asia, said.

“Looking ahead, buyers will continue to bargain-hunt in Singapore,” she added.

While office take-up in more mature markets such as Singapore and Kuala Lumpur remained weak in 2016, they saw significant pick-up in tenant demand in Q2 this year, with office rents increasing.

Due to stronger than expected rental growth, JLL upgraded Singapore’s office rental forecasts for 2018 by 10 %, and prime office rents are expected to rise 20 % over the next four years.

Marina One, the largest single office development in Singapore that is completing in Q3 this year, is already 70% pre-committed.

During the first half of 2017, occupied office space in Southeast Asia increased by 4.6%, compared to 4% in 2016, thanks to leasing demand by e-commerce firms, business services and financial firms.

Large-scale Chinese groups are also showing interest in Indonesia, Vietnam and Philippines, the data shows.

“These investors are keen to tap Indonesia’s attractive economic and demographic profile. In Jakarta, we expect advance purchases of office assets under construction to remain the most likely point of entry. We anticipate continued interest in industrial and logistics assets in the next six to twelve months, as they’re seen as an avenue to leverage the growth in manufacturing and e-commerce in Southeast Asia,” said Ms Lim.

Nonetheless, while investors are looking on the bright side, consumer sentiment across the region is still weak. Indonesia’s retail sales grew at 4.7 % year-on-year in Q1 this year, down from 10.5 % in 2016.

In Singapore, retail sales have declined for three years but saw a marginal improvement, growing by 0.6 % in January to May 2017.