Thursday, March 24, 2011

Grade A office capital value up 11.2% in Q1

THE average capital value of Grade A office space in the Raffles Place/New Downtown area has increased about 11.2 per cent quarter on quarter to $2,322 per square foot in Q1 this year, according to Colliers International.

The property consultancy predicts the full year increase will come in at about 25 per cent to about $2,600 psf.

John Stinson, Cushman & Wakefield's managing director of capital markets (Asia Pacific), who recently brokered the $889 million sale of Capital Square, forecasts that capital values of Grade A office space in Singapore could reach $2,500-2,700 psf by the end of this year from about $2,300-2,400 psf currently.

'There's increasing demand from a new wave of international capital focusing on Singapore and a lack of supply of institutional grade office investment properties in the Singapore market,' he said.

Capital Square's $889 million works out to $2,300 psf on net lettable area.

Colliers International's prediction of a 25 per cent increase this year in the average capital value for Grade A offices in Raffles Place/New Downtown is higher than its forecast for a 15-20 per cent increase in average rental value for the same type of space over the same period.

'Cap values will move at a faster clip than rents this year as they've been lagging behind rental growth over the past year,' says Colliers' director (research and advisory) Tay Huey Ying.

The $2,322 psf average cap value for Q1 2011 reflects a 33.5 per cent increase over the same year-ago period. However the latest figure is still about 17.5 per cent shy of its previous peak of $2,814 psf in Q1-Q3 2008.

Ms Tay said the property consultancy's estimate of cap value this quarter took into account the recent transactions at Capital Square, One Finlayson Green ($2,520 psf) as well as four floors of Prudential Tower at $2,430 psf (excluding rental support).

She said the firm's Q4 2010 cap value figure of $2,088 psf, which reflected an 8 per cent quarter-on-quarter increase, did take into account K-Reit Asia's and Suntec Reit's respective acquisitions of one-third stakes in Marina Bay Financial Centre's first phase (both deals were at about $2,400 psf excluding income support).

'However, MBFC is one of the newer buildings in our Grade A basket and our average figure for Q4 took into account some of the older buildings in this basket as well,' Ms Tay added.

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