According to detailed sector analysis by the Asian Real Estate Research Division of UBS, commercial Singaporean properties will continue to represent an excellent medium term investment choice for REITs and property investors looking to achieve organic growth from their portfolios; but UBS warn against committing to Singapore commercial property purely for short term capital appreciation purposes.

UBS’ detailed analysis reveals many interesting facts about the ongoing supply and demand ratio in Singapore for grade ‘A’ office space, certain retail space and also the residential property market in Singapore for example; furthermore it covers the fact that the city state’s government have made massive progress in terms of developing tourism and financial services in Singapore which are additional factors in favour of property price and rental rate increases making Singapore a potentially attractive property investment destination for at least the medium term.

Because of the geographic nature of the city state of Singapore there is a finite supply of certain grades of commercial space, and since the city state has witnessed a significant boom in its financial services and offshore sector the demand from local and international banks and financial houses for prime office space has significantly increased. 

As the government of Singapore have done everything within their power to create a sustainable and attractive environment for the investment of offshore funds from Asia and Europe there is absolutely nothing to suggest that this demand for prime office space from the financial services sector is going to abate.  This fact alone led UBS to forecast significant rental rate increases of up to 60% in the next eighteen months in Singapore.

As stated however the Asian Real Estate Research Division are quick to suggest investors guard against direct exposure to Singapore commercial property purely for capital appreciation because assets in the city state are quite simply highly priced and slow to sell on.  The Division examines the role of REITs and how investors can use such investment vehicles to gain exposure to commercial property in Singapore. 

REITs allow an investor to tap into the long term net asset appreciation of commercial properties of course; but in the short to medium term because of the state of the property market in Singapore a well managed REIT should have the ability to expand organically through the increase in rental yields as well as any direct enhancement that the real estate assets held within the trust benefit from – as a result of infrastructure improvement for example.