Singapore’s CapitaLand Integrated Commercial Trust is facing calls from buyers to lower its asking price for a prime office tower, in a sign of mounting pressure for discounts on commercial assets in the city state. 

The real estate investment trust (REIT), the largest by market value in the Asian financial hub, has put 21 Collyer Quay in the city centre up for sale, people familiar with the matter said. 

Despite originally seeking to sell the 21-storey building at S$700 million to S$800 million, or S$3,286 psf to S$3,756 psf based on its net lettable area, buyers are seeking prices significantly below that amount, the people said, asking not to be identified discussing private matters.

At least one bidder earlier this year offered about S$600 million to S$700 million for the building, and the REIT is still in discussions with prospective buyers, the people said, while adding that it may still opt to keep the property. The tower was valued at S$649 million at the end of last year.

Representatives of CapitaLand Integrated Commercial Trust declined to comment. 

The negotiations reflect a perception gap in Singapore’s prime office market, which has been a standout during the global commercial real estate downturn. Buyers are seeking lower prices because they are concerned about high interest rates and changing work patterns. But sellers are resisting, pointing to low vacancy rates and still-rising rents for city centre spaces.

Singapore’s REIT sector has been under particular pressure due to elevated interest rates. The financial regulator recently proposed simplified leverage rules to ensure REITs can adequately meet their interest payments.

There has also been a push to divest non-core assets in recent months. Mapletree Pan Asia Commercial Trust divested a 19-storey prime office building, Mapletree Anson, last quarter for S$775 million, or about S$2,352 psf, to investment firm PAG, according to realtor Savills plc.

The CapitaLand REIT acquired 21 Collyer Quay in 2005 at a purchase price of S$147 million. It is now fully occupied, with co-working space provider WeWork Cos having a committed lease until 2028. A lease with HSBC Holdings plc ended in 2020. 

  - Bloomberg