Singapore stands out as attractive property investment destination in Asia

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Singapore stands out as an attractive property investment destination, said a recent research report by Colliers International. Colliers International, a global leader in commercial real estate services, today released its latest research report Top Occupier Locations in Asia: Implications for Investors.

The report assesses the investment implications of Colliers’ recently released Top Locations in Asia: Technology and Top Locations in Asia: Finance reports for property occupiers. Based on a comprehensive study of 16 cities in developed and emerging markets across Asia, these reports examine 50-60 criteria across socio-economic, property and human factors to determine the best occupier locations in Asia.

Mr. Andrew Haskins, Colliers’ Asia Head of Research, commented: “Growth potential and availability of talent are vital to technology firms, for which the top three locations are Bangalore, Singapore and Shenzhen. Economic scale and wealth measures are pertinent to financial groups, for which the top three locations are Hong Kong, Tokyo and Singapore.”

Mr. Terence Tang, Managing Director, Capital Markets and Investment Services, Asia, added: “In the current competitive investment environment, it is even more important for investors to understand their real estate clients and users to a greater extent in order to differentiate their proposition in terms of landlord services and amenities to attract high value tenants. This report highlights some of the occupier preferences and should help investors make more informed investment decisions.”

Office assets in Bangalore offer Asia’s top long-run rent and capital growth potential for investors. Singapore appeals to firms and employees in both technology and finance sectors, with the promise of medium-term rent growth. Shenzhen thrives on a broad technology base and GBA integration, and new supply offers investors more choices of assets.

Hong Kong dominates traditional finance and boasts a fast growing fintech sector. Financial occupiers are moving outward, creating new opportunities for investors who should follow tenants to CBD fringe areas such as Wanchai. Employment inflows and low net supply are driving Tokyo’s office market. Core areas, in particular will continue to provide good investment opportunities. Tokyo assets also happen to offer Asia’s widest yield gap over bonds.

A closer look at Singapore as an attractive property investment destination

Singapore stands out as an attractive property investment destination. It is the only Asian city which counts as top three location for both tech and finance tenants in Colliers’ study. Given Colliers’ forecast of limited new supply until 2021, the near-term supply-demand balance in Singapore is favourable unless the economy weakens far faster in 2019. Moreover, Singapore’s hub position in South East Asia and pro-technology and pro-finance policies should ensure continued occupier demand over the medium term.

Investors in Singapore office properties can expect steady rent growth of over 5% per annum for the next five years, and hopefully beyond. This robust income growth should drive steady increases in capital values over the same period. With supply of office assets limited in Singapore, business park assets represent an attractive alternative.

The report said that as a location, Singapore is #2 for technology and #3 for finance, with high scores on employment criteria, talent availability and human factors. It added that rent growth from Singapore office assets should reach 8% in 2019 and average 5.4% over 2018–2022, helping drive solid capital growth for investors over that period. Business park assets also look attractive, it noted.

The study said that Singapore will remain an attractive property investment destination especially to tech occupiers for the next 10–20 years, despite limited supply of prime-grade office stock, and that this reflects the city’s top position in Asia as a source of talent, on employment criteria (e.g. political stability, ease of doing business, city infrastructure), and on human measures (e.g. safety, living quality, air pollution).

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The study said that Singapore remains an attractive property investment destination as it  is seeing strong demand for office space from other sectors such as flexible workspace.

“Given our forecast of limited new supply until 2021, the near-term supply-demand balance in Singapore is favourable unless the economy weakens far faster in 2019 than we currently assume. Moreover, Singapore’s hub position in South East Asia and pro-technology and pro-finance policies should ensure continued occupier demand over the medium term.

Investors in Singapore office properties can expect steady rent growth of over 5% p.a. for the next five years, and hopefully beyond. This robust income growth should drive steady increases in capital values over the same period. With supply of office assets limited in Singapore, business park assets represent an attractive alternative.

In valuation terms, Singapore property looks reasonable. The net yield of 3.6% for office assets is within the 3.5–4.5% range for most Asian developed cities other than Hong Kong. Meanwhile, Colliers estimates that business park assets in Singapore yield 5.2-6.2%, and logistics assets yield 6.0-7.0%.”

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