Allianz and Gaw partner up in latest S$1.6B commitment to Singapore market
The sale of a well-recognized real estate complex in Singapore for $S1.6 billion this week signalled the strength of demand from overseas capital in the city state’s booming office market.
Allianz Real estate and Gaw Capital teamed up to acquire Singapore’s Duo Tower and Duo Galleria, a complex that includes two skyscrapers with offices and a mall. The German insurer has agreed to a 60 percent stake of the premium grade-A office and retail asset from seller M+S, while real estate private equity firm Gaw Capital Partners acquired the remaining 40 percent.
“The size of the deal illustrates the confidence investors have in Singapore and its commercial real estate market,” says Chris Fossick, head of Southeast Asia for JLL.
A big part of the draw for investors: rising office rents. Singapore’s prime office rents are expected to grow 33 percent between 2018 and 2022 – the highest globally, according to data from JLL.
“This deal reflects the strength of Singapore market in attracting international insurance capital,” says Stuart Crow, Head of Capital Markets in Asia Pacific for JLL, which was the sole representative for the seller on the transaction. “We are seeing an increased appetite for JV deals as investors are looking for more creative strategies to access investment opportunities.”
Other core funds that have recently sought to take advantage of the city’s long term growth prospects by investing in partial stakes in prime Grade A buildings include Ocean Financial Centre - Allianz took a 20 percent stake - and Frasers Tower, in which NPS took a 50 percent stake.
In June, Chevron House – a 32-storey office and retail building in the heart of the city’s central business district – was sold to U.S. real estate fund AEW for S$1.025 Billion, a 35 percent increase on capital value from when it was purchased in 2017.
“The strong growth in Singapore office capital values over the last 12 months is supported by the market’s very favourable demand-supply dynamics and a benign interest rate outlook,” says Regina Lim, Head of Capital Markets Research for Southeast Asia in JLL.
Supply of office space in the next few years is expected to be tight, as owners of older office buildings may capitalize on recent government planning incentives to redevelop their assets for new integrated life-work-play buildings.
The Duo complex comprises 557,972 square feet of international premium grade-A office space and 59,873 square feet of retail space.
The asset, which is currently 97 percent occupied, “is poised to establish itself as one of Singapore’s major business hubs and will be an excellent addition to our global 24/7 cities office portfolio,” said Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate in a statement.
As the global retail market continues to be impacted by the growth and changes from e-commerce with overall global investment down 20 percent globally in the first half of 2019, Asia Pacific is bucking the trend with investment in retail assets up 7 percent in the same period.