SINGAPORE (Sept 29): DBS Group Research says the record price paid for the Beach Road site in psf terms proves Singapore’s office sector remains an attractive physical asset class for investors.
More importantly, similar to the Central Boulevard land sale and recent office transactions, the sale of the Beach Road land parcel points to the undervalued status of the listed Singapore office REITs, especially since most of the properties owned by the office REITs are located in more prime locations than the Beach Road site.
URA last night announced GuocoLand submitted the highest bid for the Beach Road commercial site at $1.622 million. A developer had triggered the site for sale by public tender in June. The reserve price was set at $1.138 million.
Based on a development with 100% Premium Grade A office tower, DBS lead analyst Mervin Song estimates the breakeven cost for the project to range between $2,242-$2,372 psf based on GFA or $2,803-$2,965 psf on net lettable area (NLA).
The implied price for the Singapore office portfolios owned by the various office REITs stands at $2,300-2,500 psf.
“Our top pick in the office sector remains Keppel REIT with a $1.23 target price given its attractive valuations. The implied price for its Singapore portfolio stands at about $2,500 psf versus recent market transactions for buildings of comparable quality at $2,600-$3,500 psf,” says
As at 11.48am, units in Keppel REIT are trading $1.18.