Qatar pays BlackRock $2.5bn for Singaporean tower

Qatar’s sovereign wealth fund is buying Singapore’s Asia Square Tower One for a record $2.45bn from BlackRock, which hopes the rare deal may mark a turning point for the city’s weakening property market.

The tower, which houses Google and Citigroup, is part of a two-tower development owned by BlackRock since it bought MGPA, the property-focused fund manager, from Macquarie Group in 2013.

The deal is the biggest in Singapore in terms of dollar amount and square footage. The Qatar Investment Authority is paying $1,960 per square foot, ranking the sale as one of the top globally for a trophy building of comparable size and prime location.

Prime office buildings in Asia rarely come on to the market and are mainly held by listed development companies or real estate investment trusts.

The BlackRock deal however comes as Singapore office rents are under pressure from a wave of new buildings at the same time as bank cutbacks stem demand for office space.

John Saunders, head of Asia Pacific for BlackRock Real Estate, said he believed that concerns about the looming supply were overstated because there was little more building expansion on the horizon.

“I have a feeling we might look back at this point and say ‘that marks the recovery point’ for the market,” he said. “We have dry powder in new funds that we’ve raised and we’re actively looking at new properties in Singapore.”

About 3.6m square feet of new office space will be launched this year in Singapore’s central business district — about three times the city’s average annual net demand, according to real estate experts. One building alone, Marina One — virtually next door to Asia Square — will have 1.88m square feet to lease.

The glut of office space will lift vacancy rates to about 14 per cent from less than 10 per cent at the end of last year, according to Sigrid Zialcita, managing director of Asia Pacific research at Cushman & Wakefield.

The upside is that we have seen a growing diversification in tenancy, with increased demand especially from new technology, asset management services, and insurance sectors

Rents in the Marina Bay area, at the centre of the financial district, are expected to decline a further 10-12 per cent this year, after falling by one-fifth last year, the property analyst said.

“The upside is that we have seen a growing diversification in tenancy, with increased demand especially from new technology, asset management services, and insurance sectors,” said Ms Zialcita.

She added that the weakening in Singapore’s office rental market was likely to be temporary as the city-state goes through an economic restructuring which includes curbs on migrant labour and measures to boost the productivity of its workforce.

The sale of the Asia Square tower began last summer, but was held up as talks fell apart first with CapitaLand, Singapore’s biggest developer, and then ARA Asset management, the property fund management specialist.

Google is due to leave Asia Square this year, moving to a location outside the central business district as its Singapore workforce expands.