Buildings stand on a plot of land earmarked for office development bordered by Beach Road, Nicoll Highway and Rochor Road is seen in Singapore. (Photographer: Nicky Loh/Bloomberg)

Singapore Snub Spoils Office Property Revival

(Bloomberg Gadfly) -- Kwek, not Quek.

It's not enough that a Malaysian tycoon is paying the most ever to build a new office block in Singapore. What's more important is that his billionaire Singapore cousin is staying away.

Malaysian billionaire Quek Leng Chan's Guocoland Ltd. snagged the Beach Road site for a record S$1.62 billion ($1.2 billion), beating four suitors, out of which another three were foreign. Tellingly, cousin Kwek Leng Beng's City Developments Ltd. didn't bother to join the contest. Nor, as broker Cushman & Wakefield notes, did other prominent Singapore builders like CapitaLand Ltd. or Keppel Corp. The lone Singaporean bid, by brothers Robert and Philip Ng's Far East Organization Pte, was also the lowest at S$1.295 billion.

What's attracting foreign builders like Quek, as well as former Chinese soldier Cui Zhengfeng, Hong Kong "Superman" Li Ka-shing and Indonesian tycoon Stephen Riady, to the outskirts of Singapore's central business district?

Banks are already spoiled for choice in Marina Bay, which will witness a fresh wave of supply when Malaysia's IOI Properties Group Bhd. and British conglomerate Jardines' Hongkong Land Holdings Ltd. are done putting up two new office towers at Central Boulevard. Besides, redevelopment of the Golden Shoe car park -- across the road from Morgan Stanley's (and Bloomberg LP's) office on Church Street -- is already underway.

With rents in central areas still 25 percent lower than on the eve of the 2008 financial crisis, who's going to trudge up to Beach Road? Facebook Inc., which has its Asia-Pacific headquarters at South Beach Tower, is also tipped to be moving to the Marina Bay area, according to the Straits Times.

If office prices are holding up better than rentals, then that's partly because money is cheap -- and partly because of Brexit. The city-state could gain as London's financial industry shops for new homes around the world; fintech is one area where Singapore is actively seeking to boost its appeal to startups.

Homegrown developers aren't entirely dismissing the cheery thesis. Last month, CapitaLand Commercial Trust, Singapore’s biggest office landlord, agreed to buy BlackRock Inc.’s Asia Square Tower 2 for S$2.1 billion. But that's also in Marina Bay, a piece of reclaimed land that came into its own when Kwek Leng Beng launched a waterfront skyscraper. He did that in a market that was then down 45 percent from its 1996 peak.

That was 13 years ago. This time around, Kwek doesn't seem to be buying into the vision of a bustling new office district in Beach Road. If he's passing it up to his Malaysian cousin, who's paying 60 percent more than what Kwek's City Developments did for the nearby South Beach land parcel at the peak of the office market in 2007, then investors should perhaps also tone down their optimism by a notch or two.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

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