Singapore's CBD property market heating up despite gloomy outlook

SINGAPORE (Nov 29): The Singapore Central Business District has just seen its fourth major office transaction in 2016, after CLSA Capital Partners acquired 77 Robinson Road for S$531 million (RM1.66 billion). The sale of One George Street is also said to be under negotiation.

UBS analyst Michael Lim notes that CLSA’s acquisition price of S$1,810 psf based on a net lettable area of 293,000 sf was on par with the fair value of S$1,787 psf for Capital Tower just across the road.

Even in retail properties, the CBD area is rife with activity. Perennial Real Estate and Singapore Press Holdings are acquiring a 60% stake in Chinatown Point Mall, valuing the 213,000 sf property at S$442.5 million, or S$2,077 psf.

According to Lim, these transactions are coming on the back of a very challenging outlook.

Manufacturing output grew 1.2% in October compared with the 7.7% growth in September. Non-oil domestic exports were also contracting faster at 12%. IE Singapore has lowered the republic’s growth estimate from between 3% and 4% to between 5% and 5.5%.

In contrast, Singapore REITs continue to trade at 6.8% yields, which is 4.45% higher than yields on 10-year government bonds.

UBS expects SREITs’ distribution per unit to grow by 1.4% for 2017, driven by healthcare and industrial REITs, and recommends Ascendas REIT and Mapletree Logistics Trust for the industrial property subsector, Frasers Centrepoint Trust for the retail property subsector exposure, and CapitaLand Commercial Trust for the office property exposure.

Shares in Ascendas REIT, Mapletree Logistics Trust, and CapitaLand Commercial Trust are trading higher at S$2.33, S$1.01, and S$1.515 respectively. Frasers Centrepoint Trust is trading 0.5 cents lower at S$1.94 on Tuesday. — theedgemarkets.com.sg