BlackRock Inc said it would sell a 43-storey Singapore office tower for $2.5 billion – one of at least three office building deals in the last two months for a market gripped by worries about oversupply and rising vacancies.

The sale to Qatar Investment Authority, a sovereign wealth fund, is Singapore’s largest office transaction. It is also the largest single-tower real estate deal in Asia-Pacific, according to BlackRock, the world’s largest asset manager.

The selling price of S$2,700 ($1,980) per square foot for Asia Square Tower 1 in the city-state’s financial district, has only been outdone by deals in London and Hong Kong, according to property consultant JLL, which was one of BlackRock’s advisers on the transaction.

The U.S. firm said the deal could mark a turning point for Singapore real estate and that gloomy views about the market were likely overdone.

“Singapore as a home for capital is always very well regarded in the region,” said John Saunders, head of Asia Pacific for BlackRock Real Estate.

“So for those folks who have dry powder and are looking to invest, frankly ourselves included, I think a lot of people are looking at Singapore and saying this could be an interesting environment,” he added.

But others were less optimistic, saying the BlackRock deal should be regarded as an exception at a time when vacancy rates for Singapore’s office property sector are near their highest level in almost a decade and a raft of new supply was about to hit the market.

“This is not a deal that triggers more deals, because of the supply and demand situation,” said Nicholas Mak, executive director at SLP International Property Consultants.

He said developers were set to add 4 million square feet of office space in Singapore this year – equivalent to about 5 percent of the current market – which will be followed by another 1.4 million next year.

Media reports have said that BlackRock had been seeking S$4 billion for the building instead of S$3.4 billion it gained. BlackRock said it was happy with the price but declined comment further on financial terms.

On a per square foot basis, similar valuations were gained in a 2014 Singapore deal, according to consultancy firm Cushman & Wakefield.

The BlackRock deal follows two smaller ones – Singapore’s Capitaland Commercial Trust’s plan to buy the remaining 60 percent of an office building it did not own and an offer by Singapore-listed MYP Ltd to buy the Straits Trading Building for S$560 million last week.

Asia Square Tower 1 has over 1.25 million square feet of net lettable area and Citigroup Inc as its anchor tenant, BlackRock and Qatar Investment Authority said in a joint statement.

BlackRock owns a second tower in the Asia Square development but first wants to complete renting out the building, which is currently close to 90 percent leased, before reviewing a sale.

Qatar Investment Authority is one of the most active sovereign investors in the world. While it has focused on investments in Europe, it has recently sought to diversify its portfolio with investments in Asia.

Source – Reuters