Singapore one of three AsiaPac office investment hotspots in 2014

Expect stronger occupier demand and rental growth.

Singapore -- along with Japan and New Zealand -- will lead the Asia Pacific region as the hottest investment hotspots for the office market in 2014, according to CBRE's Asia Pacific Office Market Outlook 2014 report.

"Japan, New Zealand and Singapore will be APAC investment hotspots in 2014 with Japan seeing more opportunities for foreign funds to offload assets, New Zealand offering high yields and decent rental growth and Singapore expecting stronger occupier demand and rental growth," said CBRE.

CBRE expects Grade A rental growth in 2014 to pick up strongly and rise to 10% y-o-y on the back of tighter, as investors exhibit a strong appetite for smaller deals generally below s$500 million.

Here's the full Singapore country report from CBRE:

Occupier Market

Grade A rental growth in 2014 is expected to pick up strongly and rise to 10% y-o-y on the back of tighter Grade A supply and sustained demand. in addition, flight to quality will continue to be a key demand driver. insurance, energy and commodities, professional services and i.T. firms will also continue to drive leasing activity. Although demand from Us and European financial institutions may take longer to return, interest from Asia Pacific-based firms in this sector – particularly Japanese banks – will continue to strengthen. Companies from China and the Middle East are also expected to be more active in leasing space in the CBD.

The office supply pipeline over the next two years will remain limited with two major CBD projects - CapitaGreen and South Beach - totaling 1.2 million sq. ft. NLA scheduled for completion. However, given the limited supply in decentralised areas and the realisation amongst tenants that space options are rapidly shrinking, the focus of leasing activity is expected to swing back to the cBD, with space in new developments highly sought after.

Capital Market

Singapore continues to see a lot of money in the market looking for investments. investors will retain a stronger appetite for smaller deals generally below s$500 million so they can diversify their risks and portfolio.

Active investors will continue to include domestic property developers and companies, domestic or pan Asian funds, REiTs and sovereign funds. While REiTs are expected to be on the lookout for assets to boost their portfolio, they will retain a comprehensive checklist to fulfil before completing any deals. The strata- title market turned quiet in 2013 after the imposition of various measures by the government and further tightening measures are not expected. However, chinese and indonesian investors have shown a fair bit of interest in this segment of the market.

Most investors will look towards a value added strategy instead of core or core plus strategies as the price for Grade A office buildings is high. investors will also look into Grade B+ office buildings in core locations with potential for refurbishment.

Capital values will maintain at current high levels with slight upward pressure should more transactions take place. Yields are expected to expand in the first half of the year before stabilising in the second half.