http://www.businesstimes.com.sg/sub/...07367,00.html?

Published October 7, 2010

Investors look at switching from housing to offices

Investment sales up to Sept total $21.9b, of which just 17% are for offices

By KALPANA RASHIWALA


(SINGAPORE) The nascent recovery in Singapore's office market and the government's cooling measures in the residential sector are leading some private real estate investors to look at switching from housing to offices.

'The thinking among some private investors from Singapore and Asia who are nimble in terms of changing between sectors is that there's probably more value in investing in the Singapore office market at this stage than the residential sector, which has been in recovery mode much longer, since the second quarter of last year,' says CB Richard Ellis executive director Jeremy Lake. 'The office market began to recover more recently, around Q2 this year.'

Analysts say another reason for the change in strategy is that while the government is trying to bring the residential market under control, it has not become involved with the office market.

Such private investors - as opposed to institutional players like property funds and insurance companies - typically have budgets between $5 million and $100 million. They could be considering buying multiple apartments in new projects, strata office floors or even a small office building.

Recently, a broad-based Singaporean investor picked up the top four floors of GB Building in Cecil Street for $30.51 million or $1,415 psf based on the net lettable area of 21,560 sq ft. The seller was insurer AXA. Two foreign investors are also said to have picked up a floor each - the 17th and 18th levels - in the same building from City Developments for $7.6 million and $7.3 million respectively, reflecting about $1,400 psf for both floors.

CBRE brokered all three transactions. GB Building is on a site with 99-year leasehold tenure starting from 1982.

Despite the pick-up in interest in office property, this segment accounted for just $3.7 billion or 17 per cent of the total $21.9 billion of investment sales of Singapore real estate sealed in the first nine months of this year, according to CB Richard Ellis. The tally for this period could increase in the next few weeks as more caveats are lodged for deals concluded up to Sept 30.

CBRE defines investment sales as transactions with a value of at least $5 million, including apartments and landed residential property, government and private sales of land and buildings, both strata and en bloc. It also includes change of ownership of real estate via share sales such as floats by real estate investment trusts. The level of investment sales of property is often seen as a gauge of the confidence of major players in the sector's mid- to long-term prospects.

Mr Lake expects investment sales for full-year 2010 to come in between 2008's $17.9 billion and 2006's $28.4 billion, perhaps just exceeding the $25 billion mark. 'With continued economic improvement there should be increasing investor interest in a stable environment such as Singapore,' he said.

'There should be growing interest in developing commercial, industrial and hotel sites in addition to the already-strong interest in residential development in 2011. The investment sales market in 2011 is expected to be vibrant and could very well cross the $20 billion mark again.' Mr Lake said.

Big-ticket deals expected to contribute to the investment sales tally for the current quarter include the upcoming initial public offer of Mapletree Industrial Trust, which will own slightly over $2 billion of industrial properties in Singapore; the tender for a white site above Tanjong Pagar MRT Station which closes next month; and the expected award soon of the landmark commercial site at City Hall, comprising the the historic Capitol Theatre, Capitol Building and Stamford House.