BlackRock's $2.5 billion sale: a sign of life for Singapore's office market

Mon Jun 6, 2016 5:07am EDT
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By Aradhana Aravindan

SINGAPORE (Reuters) - BlackRock Inc (BLK.N: Quote) said it would sell a 43-storey Singapore office tower for $2.5 billion - one of at least three office building deals in the last two months for a market gripped by worries about oversupply and rising vacancies.

The sale to Qatar Investment Authority, a sovereign wealth fund, is Singapore's largest office transaction. It is also the largest single-tower real estate deal in Asia-Pacific, according to BlackRock, the world's largest asset manager.

The selling price of S$2,700 ($1,980) per square foot for Asia Square Tower 1 in the city-state's financial district, has only been outdone by deals in London and Hong Kong, according to property consultant JLL, which was one of BlackRock's advisers on the transaction.

The U.S. firm said the deal could mark a turning point for Singapore real estate and that gloomy views about the market were likely overdone.

"Singapore as a home for capital is always very well regarded in the region," said John Saunders, head of Asia Pacific for BlackRock Real Estate.

"So for those folks who have dry powder and are looking to invest, frankly ourselves included, I think a lot of people are looking at Singapore and saying this could be an interesting environment," he added.

But others were less optimistic, saying the BlackRock deal should be regarded as an exception at a time when vacancy rates for Singapore's office property sector are near their highest level in almost a decade and a raft of new supply was about to hit the market.

"This is not a deal that triggers more deals, because of the supply and demand situation," said Nicholas Mak, executive director at SLP International Property Consultants.   Continued...

File photo of a BlackRock building in New York June 12, 2009. REUTERS/Eric Thayer