Singapore’s office investment market is facing a rare slowdown, with last year marking the slowest pace since the onset of Covid-19 in 2020. According to data compiled by MSCI Inc., office transactions totaled only about S$3.2 billion ($2.5 billion) in 2024, and first-half volumes this year are tracking at similar levels, Bloomberg reports.
Despite the decline in activity, Singapore’s office sector has largely avoided the steep devaluations seen in other global financial hubs. The market, however, is caught in a stalemate: institutional investors are seeking discounts that property owners are reluctant to offer, leaving sellers hoping ultra-wealthy individuals might step in as buyers.
The 16-story office building at 55 Market Street illustrates the trend. Purchased by a unit of Japanese developer Kajima Corp. in 2022 for about S$287 million, the building has remained mostly empty for months. Efforts to sell it at the S$330 million asking price have fallen short, highlighting the difficulty in bridging the pricing gap even with an influx of foreign wealth.
Singapore has seen growing interest from family offices, which numbered over 2,000 last year and benefit from broad investment mandates. However, these buyers are selective, gravitating toward opportunities globally that promise stronger returns. “Unless the principals are committed and desirous of investing in Singapore real estate, there can be a lot of misses than hits,” said Steven Ming, founder of Sakal Real Estate, a boutique investment broker.
Even wealthy buyers willing to consider the market have specific requirements. Challenges such as the lack of underground parking at 55 Market Street have discouraged some prospective buyers, while others seek higher returns rather than trophy properties, according to Terence Tang, co-founder of Atelier Capital Partners.
Some owners have adjusted strategies to attract high-net-worth buyers. CapitaLand Integrated Commercial Trust recently accepted a S$688 million offer for a 21-story office building, slightly below its original asking price, Bloomberg reports. Other developers, like PGIM, are marketing buildings floor-by-floor to appeal to private investors and family offices.
Prime office values in Singapore have remained robust, averaging S$24,167 per square meter ($2,245 per square foot), higher than comparable markets like Hong Kong, Tokyo, and Sydney. While forecasts from Jones Lang LaSalle Inc. suggest capital values could rise more than 15% from 2024 to 2029, the city-state’s low capitalization rates make offices less appealing for investors seeking higher yields.
With supply expected to remain tight in the central business district, Singapore’s office market appears safe from sharp declines—but for sellers, securing transactions at their desired price continues to be a challenge.
