Office revamp in Singapore offers higher returns

20140904-bt-office-revamp-in-singapore-offers-higher-yield-pic SINGAPORE has emerged fourth in a recent report that found that the city-state offers investors some of the most attractive returns for minor office building refurbishment investments at 7.53 per cent.

It is one of the top three Asian cities in the ranking, with Shanghai beating it to third place and Hong Kong, which ranked seventh.

The report, done by Arcadis - a leading global asset design and consultancy firm - considers both major and minor refurbishment projects in 15 cities across the world and ranks them by the best expected net rental income return.

According to the report, minor building refurbishment aims to extend the life of an office asset by up to five years, while major refurbishment aims to do so by 15-20 years.

"There are many older office assets in Asia that have not received sufficient investment and which are now failing to realise their full potential," explained William Taam, Arcadis executive director and Asia financial institutions sector lead. "This is also the reason why Shanghai, Singapore and Hong Kong offer investors attractive returns for minor office building refurbishment."

However, Asian markets, including Singapore, might be risky for investors looking to reap returns for refurbishment projects due to the high volume of new office buildings making these markets very competitive.

Singapore has also seen a tide of offices moving away from its traditional central business district to places nearby such as Marina Bay.

Mr Taam suggests that to cope with such competition, investors need to ensure that the building refurbishments made are aligned to support business and brand strategies of its occupiers. Buildings also need to reposition themselves through minor refurbishing to avoid becoming obsolete, prevent existing tenants from leaving and to attract new tenants.

For Asian investors looking for opportunities outside their region, European cities London, Warsaw and Madrid are a good bet for attractive returns on major as well as minor office building refurbishment investments.

Source: Business Times, 4 Sep 2014