Sound business opportunities remain in Singapore's property development market, as demand is set to rise further on the back of Asia's growing prominence in the global economy, according to a major player.
While Singapore’s recent measures to tame residential speculation signal overheating, Warren Bishop, CEO of Raffles Quay Asset Management (RQAM) – developer of Marina Bay Financial Centre (MBFC) – said that local demand, which made up for half of the residential tower sales, is unaffected. Other demand for the residential tower last year was from Malaysia, China, Indonesia and Hong Kong. Demand for office space is also strong, as Singapore’s connectivity to the world is unaffected by the global crisis.
After completing the 4-billion Singapore dollar (Bt95.1 billion) mixed-use development, which comprises two residential and three office buildings, RQAM is waiting for the Singaporean government to release new land plots for development.
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HUGE OFFICE DEMAND
“The market is quite robust. The long-term market is stable as Singapore is established as the location for headquarters in Southeast Asia,” Bishop said.
While Hong Kong’s office market serves business in North Asia, Singapore benefits largely from growth in Southeast Asia. Increasing demand in Indonesian commodities has sparked huge office demand in Singapore among new companies establishing a first-time presence in Southeast Asia.
The Singaporean government’s policy will contribute to the property market’s growth, Bishop said.
Starting with the reclamation of land for Marina Bay to create a new downtown about 20 years ago, Singapore has introduced new rules to attract financial institutions and non-financial companies to set up regional offices. The new central business district, where MBFC is the landmark, is to support those companies’ relocation.
Of total reclaimed land of 360 hectares in Marina Bay, MBFC takes up 3.5 hectares, while another plot is home to Marisa Bay Sands. Bishop said he believed the government was releasing the remaining land in line with its supply management. Too much development could affect prices, but insufficient space could also drive business elsewhere. The land is enough for the development of 15 million square feet and so far only 5 million has been developed.
“Yes, there are opportunities in this area,” said Bishop.
According to Jones Lang Lasalle in the first quarter of this year, as some companies moved to the new CBD, new entrants appeared to take up space in vacant buildings. New entrants to the market include Swiss National Bank, Digital Realty, Gunvor and Nikon.
Bishop believes the new entrants are a result of the government’s proactive measures in setting Singapore as a financial hub. Reflecting the long-term planning, MBFC is connected to the city with 4 MRT lines. The project is also designed to showcase the new environmental-friendly standards, to please the growing number of green-conscious companies. New building standards are applied to make it a world-class complex.
Major tenants of MBFC’s office towers are mainly financial institutions, legal companies and commodities companies. UK’s Standard Chartered Bank and Singapore’s DBS Bank each take up 500,000 square feet for their headquarters. All seek long-term leases, mostly 5-10 years, according to Bishop.
He is also confident that the Singapore government can prevent overheating in the property market. While measures have been undertaken to control residential prices, the government has a strong grip on land supply to control commercial prices.
Capital inflows from the west are not expected to change the outlook. Bishop admitted that some foreign investment in Singapore’s residential property contained speculative elements. But this capital could also be diverted to listed real estate investment trusts, turning it into real investment.