BT : S'pore commercial property sizzling: DTZ

Business Times - 20 Aug 2010

S'pore commercial property sizzling: DTZ

By EMILYN YAP

SINGAPORE'S prime industrial, retail and office properties offer some of the most attractive returns in the world, according to a new study by DTZ.

The property consultancy launched a set of fair value indices yesterday, derived by forecasting the returns commercial property investors can get above government bond yields, over five years across 180 markets.

Markets where expected returns exceed required returns would be labelled 'hot'. The larger the number of hot markets in a region, the higher its index score would be.

Results showed that Singapore was a hot market in the second quarter. The island's industrial property sector came in as the most attractive to invest in, ahead of Antwerp and Hong Kong in second and third places respectively. DTZ estimates that industrial assets here were underpriced by some 11 per cent.

Industrial rents are 'expected to return to growth this year in Hong Kong and Singapore after an extended period of weakness' that started in H2 2008, DTZ said in a release.

Singapore's retail property sector took third spot in terms of investment attractiveness, behind first-placed Los Angeles and second-placed Chicago. DTZ found that malls here were underpriced by 9 per cent.

Offices in Singapore were also underpriced by around 9 per cent, but the presence of even better returns in other cities meant that the country fell out of the top three spots. The office market in San Francisco offered the best value, followed by that in Hong Kong and Tokyo.

DTZ believes that office rents in Singapore will register strong growth in the next five years - they could rise 5-10 per cent in H2 this year - and this will lead to capital growth. Its global head of forecasting Tony McGough added that Singapore's office market is likely to stay hot in the next few quarters.

The reading for the global fair value index was 62 in Q2, surging from 24 a year ago, reflecting the increased number of investment opportunities brought about by the economic recovery.

The Asia-Pacific index had a score of 67, meaning that the region's commercial property market offered relatively better returns.

But pickings were richest in the US - its index clocked a reading of 89. According to DTZ's Asia-Pacific business development and client services head David Watt, many investment funds are focusing their attention on buying opportunities in the US now. The thinking is, 'we know Asia is a great story, but we'll get back to it', he said.

The index for Europe had a score of 49, the lowest among the three regions.

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