Blackrock said the worst is over for Singapore's office property market with supply tapering off, and that elsewhere in the Asia-Pacific, the world's largest asset manager is looking to raise its real estate exposure in Japan and Australia.
Prime office rents in Singapore's financial district dropped by more than 10 per cent in the past two years due to oversupply, making it one of the worst performing major Asian markets. But the outlook is improving with analysts expecting limited new developments until 2021 after some constructions this year.
"You get short supply and demand holds up, then all of a sudden rents start going up. We are already past that inflection point in Singapore," John Saunders, Asia-Pacific head at BlackRock Real Estate, told Reuters on Thursday.
"We are starting to see it become more of a landlord's market and we are starting to see rents move again and that makes it very attractive," he said, adding that the firm is mulling investments in malls and industrial assets in Singapore.
In Singapore, BlackRock last year sold its 43-storey office building, Asia Square Tower 1, for US$2.5 billion to Qatar Investment Authority in what was the city state's largest ever office transaction.
The US firm hailed the deal as indicating that gloomy views about the market were likely overdone.
But others have been less optimistic, with Singapore ranked 21st out of 22 Asia-Pacific real estate markets for investment prospects in a recent survey by PwC and Urban Land Institute.
Mr Saunders, however, highlighted strong investment interest in Singapore from funds and corporates. "There's competition from all around - funds, domestic capital and there's also non-domestic Asian capital," he said.
He said BlackRock's remaining tower, also in the Asia Square development and nearly 95 per cent occupied, is "a very sought-after asset", but declined to comment on a potential sale.
Adapted from: The Business Times, 8 April 2017