Here's why Singapore properties are still hot amid global lull

Thanks to tenants preferring to own their premises.

According to a report by Pacific Star, retail and office sectors in Singapore and Bangkok are expected to drive interest in Asian REIT despite global slowdown. Singapore, Kuala Lumpur and Bangkok are favoured for Retail, as well as Singapore’s and Bangkok’s prime office sectors.

Here's more from Pacific Star:

Office Sector

Pacific Star favours Singapore in this sector as it remains an attractive business hub, with expansions coming from the commodities, pharmaceutical and IT industries, and more foreign law firms, as the country opens up its legal sector. Bangkok is the other favoured office pick with rising demand for office leases and minimal incoming supply. Post-flood recovery works have contributed to positive economic growth, and improving business sentiment in Thailand.

Leasing demand is also now shifting to decentralised sub-markets as firms seek more cost-effective solutions. Rents and occupancies were especially resilient in the decentralised sub-markets in Hong Kong, Singapore and Shanghai. There is rising interest in strata-titled office units or small buildings, and tenants now prefer to own their premises.

For the first half of 2012, the retail sector has not disappointed investors as it has outperformed the office and residential sectors, as forecasted by Pacific Star. Leasing demand was driven mainly by international retailers eager to tap into a more affluent ASEAN domestic market, growing tourist arrivals and to establish brand presence.

Singapore is a favoured ‘retail pick’ for several reasons: new tourist attractions like Gardens by the Bay, more consumer high-end labels coming into the market as well as F&B operators expanding and a limited supply pipeline. The landscape is further transformed by landlords implementing asset enhancement initiatives in the downtown area.

Residential Sector

Cooling measures to dampen speculation have moderated the luxury housing sector in Asia, especially in Singapore with the hefty 10% Additional Buyer’s StampDuty implemented in late 2011. Anti-speculation measures remain in place in China while Malaysia introduced stricter loan guidelines based on net salaries. The outlook is further exacerbated by less generous expatriate packages and slower corporate expansions.

Pacific Star refrained from classifying any Tier 1 picks in this sector. However, the Tier II (this classification offers attractive opportunities but with higher risks) picks are Singapore, Kuala Lumpur, Tokyo, Bangkok and Hong Kong. Singapore’s residential market will see continued headwinds to foreign interest in the near term while the outlook for Kuala Lumpur is dampened by more incoming supply.

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