S’pore offices among markets with highest yields: Savills

SYDNEY — Singapore offers one the highest returns for offices among the world’s major markets, showed a report by broker Savills, while Hong Kong and New York offer the worst.

Grade A commercial properties in Singapore’s central business district have an effective yield and market yield of 5.29 per cent and 4.85 per cent, respectively, based on the Savills/Deakin University World Office Yield Spectrum, which was released yesterday.

“Top notch Grade A office headline yields in Singapore have been relatively high because of a two-tier market structure here. The large quantum of investment needed to acquire a significant stake in a Grade A office building here, often in excess of S$1 billion, limits the playing field to the institutional investors, corporate and real estate investment trusts. Given that ownership has been keeping a very tight grip of these prized assets, disposing only if they meet their hurdle rates of return, the concept of value is, therefore, many a time derived from the opinion of professional valuers,” said Mr Alan Cheong, senior director for research and consultancy at Savills Singapore.

“At another level, there are the strata-titled office space, which command a much higher value on a per unit floor space measurement basis. With copious amounts of liquidity in the system, these have been transacted more frequently and thus, capital values are more an observed fact.”

Meanwhile, the report also showed that Hong Kong and New York offer the lowest returns: Grade A commercial properties in Hong Kong’s central business district yielded 2.85 per cent and New York’s 3.29 per cent after excluding tenant incentives. Agencies