By Aradhana Aravindan and Anshuman Daga
SINGAPORE (Reuters) - BlackRock (N:BLK) said the worst was over for Singapore's office property market with supply tapering off, and that elsewhere in Asia Pacific, the world's largest asset manager was looking to raise its real estate exposure in Japan and Australia.
Prime office rents in Singapore's financial district dropped by more than 10 percent in the past two years due to oversupply, making it one of the worst performing major Asian markets. But the outlook is improving with analysts expecting limited new developments until 2021 after some constructions this year.
"You get short supply and demand holds up, then all of a sudden rents start going up. We are already past that inflection point in Singapore," John Saunders, Asia-Pacific head at BlackRock Real Estate, told Reuters on Thursday.
"We are starting to see it become more of a landlord's market and we are starting to see rents move again and that makes it very attractive," he said, adding the firm was mulling investments in malls and industrial assets in Singapore.
He said a tighter Chinese grip on capital outflows was not having a major impact on real estate investments, as most purchases from the mainland were outside Asia.
BlackRock is looking to buy more office properties in Japan and retail assets in Australia, where it recently invested in an office complex, he said.
Asia Pacific accounts for about 30 percent of the $21 billion in assets under management at BlackRock Real Estate. The office segment is top ranked in its portfolio, followed by retail, residential and industrial sectors.
In Singapore, BlackRock last year sold its 43-storey office building, Asia Square (NYSE:SQ) Tower 1, for $2.5 billion to Qatar Investment Authority in what was the city state's largest ever office transaction. The U.S. firm hailed the deal as indicating gloomy views about the market were likely overdone.
But others have been less optimistic, with Singapore ranked 21st out of 22 Asia Pacific real estate markets for investment prospects in a recent survey by PwC and Urban Land Institute.
Saunders, however, highlighted strong investment interest in Singapore from funds and corporates.
"There's competition from all around - funds, domestic capital and there's also non-domestic Asian capital," he said.
He said BlackRock's remaining tower, also in the Asia Square development and nearly 95 percent occupied, was "a very sought after asset", but declined to comment on a potential sale.