Tag Archives: Office Rental

Prime office rents: No reprieve in sight for 2017

The “flight-to-new projects” – a term used by the office leasing sector to describe the trend of tenants swarming into swanky new office projects – is set to continue next year as companies capitalise on softening rents to upgrade their working spaces.

This merry-go-round, however, is causing pain to landlords of older buildings in the Central Business District (CBD). Based on analysts’ projections, overall prime CBD office rents may fall by up to 10 per cent next year.

But capital values may still hold up amid keen interest for office assets from private capital and the infrequency in office transactions in the tightly held sector.

Said Cushman & Wakefield research director Christine Li: “If the current global macroeconomic and local micro-market dynamics continue to prevail, average office rentals are expected to soften in the short term due to supply pressures with DUO Tower, 5 Shenton Way (UIC Building) and Marina One completing over the next six months or so.”

Overall gross effective rents of CBD Grade-A office are expected to drop by up to 5 per cent next year, after an estimated 8.4 per cent decline to around S$8.50 per square foot (psf) per month this year, Ms Li said.

Savills Singapore is expecting a rental decline of about 10 per cent next year for the CBD Grade-A offices that it tracks, which cover those with multinational tenants and floor plates of at least 10,000 sq ft per floor, after an estimated 5 per cent drop in rents this year to S$8.85 psf per month; CBRE is projecting a 5-10 per cent fall in Grade-A office rents in “CBD Core” in 2017.

Consultancies derive these estimates by tracking a basket of prime CBD offices – each varying from one firm to another. JLL, which tracks investment-grade assets in the CBD, is expecting a smaller 6.6 per cent drop in rents next year as the new supply is gradually absorbed, after a 9.9 per cent fall in 2016.

The office rental index of the Urban Redevelopment Authority (URA) for the Central Region (a wider region that includes fringe areas outside the central area) registered a 6.6 per cent drop over the first three quarters of this year, after a 6.5 per cent drop for the whole of last year. It was 13.2 per cent below the last peak in Q1 2015. Office prices in the same region slipped a smaller 2.2 per cent over the first three quarters this year.

Net take-up of office space in Downtown Core (covers CBD, City Hall, Bugis, and Marina Centre) tracked by the URA during the first three quarters – going by change in occupied space – was nearly 183,000 sq ft, a 69 per cent drop from the year-ago period; the historical average from 2011 to 2015 was around 940,000 sq ft. There is typically a lag from lease commencement to the time tenants move into the new premises.

Savills Singapore research head Alan Cheong believes that annual net take-up of CBD Grade-A office may drop to around 500,000 sq ft in the next five years unless new growth drivers step up fast to fill the gap left by beleaguered industries.

Already, the office leasing market this year has been largely driven by relocations rather than new leases. The former made up 63 per cent of all office leases inked to-date, from 37 per cent last year, based on Cushman & Wakefield’s analysis.

JLL head of research for South-east Asia Chua Yang Liang noted that as pre-leasing activity for the new supply such as Marina One, DUO Tower, and UIC Building started around 2015 and 2016, landlords of existing developments are under pressure to keep existing tenants, let alone attract new ones, and this pressure will persist into 2017.

Guoco Tower, which received temporary occupation permit (TOP) in September, hit 85 per cent in occupancy rate for signed leases and those under advanced negotiations. It is said to be bucking the market trend, with asking rents inching above S$10 psf per month in some cases as the landlord GuocoLand fills up the higher floors.

DUO Tower and Marina One, both developed by M+S, are said to have both reached over 30 per cent in pre-lease commitments for office space, according to brokers.

Among the latest relocation leases, BP is said to be moving to Marina One, where it is taking up 70,000 sq ft and letting go of a similar amount of space at Keppel Bay Tower.

Over at 5 Shenton Way, the former UIC Building has secured serviced office provider JustOffice and Japanese shipping group Mitsui OSK Lines, which are taking 40,000 sq ft and 68,000 sq ft respectively.

Based on Savills’ estimate, from Q4 2016 to 2018, around 926,000 sq ft of CBD Grade-A “secondary space” will be freed up by relocating tenants. Together with the available secondary space of 305,000 sq ft carried over from the previous periods, there will be a total of some 1.23 million sq ft of secondary space to be absorbed.

Close to 3 million sq ft in CBD office gross floor area (GFA) is slated to come onstream next year, after some 2.3 million sq ft of office GFA was completed this year, according to Knight Frank.

The relocation story is expected to continue unfolding next year as the upcoming Frasers Tower at Cecil Street is ramping up interest ahead of its completion in 2018 while Marina One and DUO Tower are still filling up their remaining space, said its head of office Calvin Yeo.

Knight Frank is guiding for a 6-9 per cent rental fall for Grade A and Grade A-plus offices in Raffles Place and Marina Bay office precinct next year, following a 10.5 per cent drop in gross effective rents to S$8.87 psf per month this year.

Most analysts believe that any rebound in office rents will come only in 2018. How soon office rents will turn the corner will depend on when net office demand picks up, said DBS vice-president for group equity research Derek Tan. He is projecting a 5-10 per cent drop in office rents in 2017 as net demand stays flat or marginally positive as companies move from older offices to newer ones.

Maybank Kim Eng analyst Derrick Heng said he sees a 5.6 per cent drop in Grade-A office rents next year on the back of rising vacancies before a slight rebound of 2.4 per cent in 2018. But ample liquidity in the market and keen interest in office buildings should keep capitalisation rates or the rate of return on the property tight.

Capital value estimates for CBD Grade-A office still fall within the S$2,300-2,700 psf range for next year. Judging from the recent enthusiastic bidding of the Central Boulevard “white” site in the government land sale programme and the sale of prime buildings such as Asia Square Tower 1 and 77 Robinson Road, institutional investors are confident of the long term fundamentals in the Singapore office market, Dr Chua said, projecting a 4.3 per cent slide in capital values next year.

According to Mr Tan of DBS, the average 3-3.2 per cent capitalisation rates in office transactions – versus the 3.75-4 per cent used by valuers in deriving capital values for most office landlords – suggests that capital values should remain stable.

Singapore falls to No 20 in prime office cost list

AMID strong and stable demand for office space in top Asian cities such as Hong Kong, Beijing, Tokyo and New Delhi, Singapore has, comparatively speaking, fallen well behind its peers, according to data from global property consultancy CBRE.

In its biannual Global Prime Office Occupancy Costs survey of 126 markets, CBRE reported that the Asia-Pacific region had seven cities in the top 10 list of office markets based on occupancy costs in the first quarter of this year.

Occupancy costs comprise rent, local taxes and service charges, CBRE said.

Its survey found that Hong Kong’s Central district topped the list, with prime occupancy costs at US$290.21 per square foot (psf) per annum, displacing London’s West End and reclaiming the No 1 spot.

London’s West End is No 2 at US$262.29 psf per annum, followed by areas in Beijing – Finance Street at US$188.07 psf per annum and the central business district at US$181.60 psf per annum.

Singapore, meanwhile, was down four spots on the list and ranked as the 20th most expensive city in the world, with prime occupancy costs down 13.8 per cent from the same period a year ago at US$94.47 psf per annum.

Chestertons managing director Donald Han expects prime office occupancy costs in Singapore to fall by a further 10-15 per cent in the next 18 months. He told The Business Times: “The general demand for office space would be about 1.2 million sq ft, yet there will be about 3.6 million sq ft of supply coming to the market. Most of that supply is from the CBD, which traditionally would cater to your financial institutions.

“With the headwinds in the financial and oil and gas sectors, demand for office space has been substantially affected, and being a financial hub, it’s no surprise that rental costs have been decreasing in Singapore.”

Globally, prime office occupancy costs rose 2.4 per cent when compared to figures from Q1 2016, with the Asia-Pacific leading the charge, growing at a faster pace of 2.7 per cent when compared to the global average.

Of the top 50 most expensive office markets, 20 were in the Asia-Pacific, 20 in EMEA (Europe, the Middle East and Africa) and 10 in the Americas.

The survey also revealed that 22 markets moved more than three ranks up year on year, with 41 per cent of them in the Asia-Pacific, indicating that the region “is still growing despite the slowdown in China”.

Said CBRE in its report: “The service sector (the key occupier of prime office space) will show particularly strong growth in Asia as pensions and insurance products gain market share, (and so) occupancy cost growth will continue to trend upwards at a moderate pace.”

S’pore office rents seen easing until 2016 at least

A YEAR ago, property consultants were predicting that Singapore office rentals would continue rising in 2015, albeit at a slower clip than last year.

However soon after 2015 started, the mood dampened quickly on the back of weak demand – especially from financial institutions, the key constituent of CBD office demand – and ahead of a surge in office completions next year.

Savills Singapore now estimates that for this quarter, its Overall CBD Grade A average monthly rental value for a typical 5,000 sq ft lease is S$9.36 per square foot, down 5.3 per cent from a year ago. This contrasts with a 14.4 per cent increase last year.

JLL estimates a 14.4 per cent full-year drop in its CBD Grade A average office rental value to S$10.32 psf as at Q4 2015 – contrasting with last year’s 16.1 per cent hike.

To put things in perspective, last year’s rental increase was on the back of tight supply rather than strong demand. But ahead of a big surge in office completions next year – including at Duo, Marina One and Guoco Tower – and the sudden weakening in demand, office rents are ending lower this year.

“It is a year where the market surprised almost overnight and turned south without much warning,” said Savills Singapore research head Alan Cheong. “The supply coming on stream is so evident to even non-property specialists that it is difficult to explain to tenants why rents will not collapse. However we believe that whilst rents will be soft, they will not come crashing down because landlords are financially strong and the market for Grade AAA and AA offices are an oligopoly.”

Most consultants expect rents to keep easing till next year at least, with some like Mr Cheong expecting the slide to continue to 2017 and possibly even 2018.

As for next year, Chris Archibold, international director and head of markets at JLL, said: “The key challenge is that we have 2.8 times the average office supply coming on stream being met by a market that is experiencing half the 10-year average annual demand.” Moreover, there is a substantial amount of space available for lease at Mapletree Business City II, which is also completing next year, that will compete with the new office supply, he added.

Summing up the sudden turn in the office market, Mr Archibold said: “The CBD office market in 2015 saw an initial rise in rents as vacancy tightened. Sentiment was buoyed during this period by technology and social media firms expanding rapidly and seeking out new office space in late 2014/early 2015. South Beach and CapitaGreen were key benefactors of these trends.

“However, the positive momentum tailed off as the market started to price in the effect of the unusually large amount of new office supply coming on stream in 2016. This, coupled with lower than average take-up and the surrender of office space by financial institutions, has been weighing down on rents.”

In similar vein, CBRE managing director, brokerage, Singapore, Moray Armstrong, said: “The dampening impact of the upcoming supply wave was accelerated ahead of physical completion of projects that are scheduled to come on line only from Q3 2016 onwards … The downturn in the energy and commodities sector and continuing challenges in the financial sector have certainly impacted office demand from these important industries.”

JLL’s Mr Archibold highlighted other global macro trends that have negatively impacted business sentiment and consequently Singapore office demand this year: the lacklustre US economy, instability in the eurozone and China’s weak economy. Some occupiers chose to move out of the CBD to suburban offices where rents are cheaper – such as Daimler and mechanical engineering services firm Beca’s relocation to Westgate Tower in Jurong.

On a positive note, new media and technology companies have been on an expansion wave this year – some within the CBD (for instance Facebook and LinkedIn), with others entered into big leasing deals to move to business parks in the suburbs from CBD offices, such as Google, Mr Archibold noted. Mr Armstrong of CBRE too highlighted that the “IT and, in particular, the e-commerce sectors are expanding and contributing meaningfully to take-up in both the office and business park markets”.

Savills’s Mr Cheong estimates this year’s Grade A CBD office demand, or net take-up, at around 600,000 sq ft – down from 701,000 sq ft in 2014 and 960,000 sq ft in 2013. This year’s demand reflects a 45 per cent drop from the 10-year average annual figure of 1.1 million sq ft. “Based on our model forecast, the estimated net take-up for 2016 is 747,000 sq ft, followed by 1.67 million sq ft in 2017.”

He predicts that the CBD Grade A vacancy rate will rise from 4.3 per cent this quarter to 10.2 per cent in Q4 2017 before easing to around 9 to 10 per cent in Q4 2018.

JLL forecasts that its overall CBD vacancy rate will climb from 6.1 per cent this quarter to 11.6 per cent in Q4 2016 before abating to 9.5 per cent in Q4 2017. It estimates islandwide net take-up of private-sector office space at about 695,000 sq ft for this year – or half the 10-year average annual (2005 to 2014) figure of 1.37 million sq ft based on government stats. On the supply side, for this year, JLL estimates the net increase in islandwide completed private-sector office space will be just 61,640 sq ft, after factoring in the (temporary) removal of office stock from the market such as at GSH Plaza, which is undergoing a revamp.

Next year, JLL expects some 3.35 million sq ft of offices to be completed on the island, which would be more than twice the 1.2 million sq ft 10-year average.

JLL expects the average monthly rental value of its CBD Grade A office basket to fall 8.9 per cent from Q4 2015 to S$9.40 psf in Q4 2016, before recovering to S$9.65 psf by Q4 2017. Mr Archibold expects the contraction in office rents to be ameliorated, especially in 2018 and 2019 as the global economy recovers and there is only a moderate amount of office space coming on stream at the time, based on the current supply pipeline.

Savills’s model, on the other hand, predicts that the rental slide will continue till 2018. It expects its Overall CBD Grade A average office rental to retreat 8.7 per cent next year, followed by further declines of 8.8 per cent in 2017 and 6.3 per cent in 2018; its Q4 2018 rental forecast is S$7.31 psf, compared with S$9.36 psf this quarter. “Although we expect rents to continue to soften in 2018 over 2017, there is a possibility that the market may surprise us with a mild recovery in 2018, assuming there is no global cataclysmic event and no big release of government land sale sites for office developments,” said Mr Cheong.

Tenant retention is topmost on the minds of landlords. “In terms of interest in the new developments,” said Mr Archibold, “some occupiers are waiting to see if the market becomes more tenant-friendly and options open up.”

“That said, certain savvy tenants that need space for critical infrastructure such as back-up air-conditioning or generators, or for branding such as naming rights or signage – ie, elements of a development that are limited in supply – are still active in order to ensure they can secure what they need,” he revealed.

Mr Armstrong acknowledged that there are some very attractive deals on offer to occupiers as developers of new office projects compete to secure leasing commitments and build occupancy. “Tenants that are in a position to capitalise will be able to secure lease benefits beyond just the financial impact. Landlords will be highly flexible for sure, but the window of opportunity for tenants may close sooner than many expect.”

BT – 11 Dec 2015

Singapore’s office rents soften in Q3 on economic outlook: DTZ

Average monthly gross rents in the CBD (central business district) declined by 4.1 per cent quarter on quarter (q-o-q) to S$10.40 per square foot in Q3, the first decline from an uptrend since 2013, said DTZ Southeast Asia.

This comes on the back of headwinds in the external economic environment.

Average monthly gross rents in Marina Bay dropped 5.5 per cent q-o-q to S$13 per sq ft, while rents in Raffles Place fell 3.4 per cent q-o-q to S$10.45 per sq ft per month. Similarly, average rents in the city fringe – such as Beach Road, Anson Road and Orchard Road – declined by 2.1 per cent q-o-q to S$8.25 per sq ft per month.

“The subdued global growth and China’s economic slowdown contributed to a less optimistic outlook for Singapore, with the Ministry of Trade and Industry (MTI) narrowing the GDP growth forecast for 2015 to be between 2 and 2.5 per cent in August 2015,” said DTZ.

Cheng Siow Ying, DTZ executive director (business space), added: “Leasing incentives have increased as landlords compete to retain and attract tenants to sustain or improve space take-up. These leasing incentives can be in the form of longer fitting out periods, rent holidays or rental rebates, which will yield lower net effective rents for the occupiers.”

As such, office occupancy in the CBD declined 0.9 percentage-points q-o-q to 95 per cent in Q3. Within the CBD, both Shenton Way and Marina Bay registered q-o-q decreases in occupancy rates of 1.8 percentage-points and 1.1 percentage points to 94.3 per cent and 94.1 per cent respectively. On the other hand, Raffles Place’s occupancy edged up 96.7 per cent in Q3 from 96.3 per cent in Q2, supported by the relatively healthy occupancy rates of newer developments such as CapitaGreen.

“The large impending supply of office space is expected to place greater downward pressure on rents in the CBD in 2016,” DTZ added. “About 2.6 million sq ft office space will come on board next year in the CBD.”

Singapore office space demand could weaken: Analysts

The supply of new office space in the central business district (CBD) is likely to outstrip demand, giving tenants more options and forcing landlords to reduce rents amid global headwinds, according to analysts.

Property services firm Century 21 has said that Singapore, being such an open economy, will be hard hit by global economic conditions such as the slowdown in China and the turmoil in stock and commodity markets.

It added that there is eight million square feet of vacant office space in Singapore now.

One office building in the CBD, CapitaGreen, is currently 83 per cent occupied, below the average of around 95 per cent for most top grade office buildings there. The new 40-storey building, completed in December last year, is home to more than 30 multinational companies, including China Life, Lloyds Banking Group and Schroders.

The owners remain bullish about prospects.

“More than 50 per cent of the tenants have moved into CapitaGreen because they need more space, and that means growth for each of the companies,” said Ms Lynette Leong, CEO of CapitaLand Commercial Trust. “And 6 per cent of the building comprises tenants that are new to Singapore – they are brand new companies that are setting up offices in their companies for the first time. As a result of that we feel that there is still a very good vibrancy in the office market.”

The building is jointly developed by CapitaLand, CapitaLand Commercial Trust and Mitsubishi Estate Asia.

However, some analysts do not share the owners’ optimism. Property services firm Century 21 expects office rents to fall by 20 to 30 per cent in the next two years.

“We are seeing quite a lot of new supply coming on stream especially next year, and with the economy broadly heading into a lot of headwinds, as well as companies in oil and gas services sector, in the commodities sector announcing retrenchment or some companies even announcing pullouts from Singapore,” said Mr Ku Swee Yong, CEO of Century 21.

“Actually the demand for office space over the next 12 to 18 months should be pretty weak. I’m not expecting any significant net demand. Then the oncoming supply, especially in 2016, could exacerbate the current vacancy situation. So today’s vacancy rate is at about 10 per cent, with eight million square feet of vacant office space across the island … I think the crunch time will be next year when our vacancy rate will start to exceed the 12 per cent benchmark.”

Colliers International added the lack of new demand from banks is the main challenge facing landlords in the CBD. The other is the move by some companies to lower rents by shifting to outlying areas such as Jurong East, where new high-quality office space is available.

Source : Channel NewsAsia – 15 Sep 2015

Prices of office space up, retail space down in Q2: URA

Prices of office space rose 0.3 per cent in the second quarter compared to the previous quarter, while prices of retail space fell 0.5 per cent, the Urban Redevelopment Authority (URA) said on Friday (Jul 24).

Rentals of office space fell 2.6 per cent in the second quarter, compared with the 0.6 per cent increase in the first quarter. Rentals of retail space decreased by 0.5 per cent, compared with the 0.3 per cent decline in the January to March period.

As of end-June, there was a total supply of about 962,000 sqm gross floor area of office space from projects in the pipeline, and a supply of 774,000 sqm of retail space, URA said.

The amount of occupied office space increased by 38,000 sqm, compared to the 19,000 sqm increase in the previous quarter, while occupied retail space remained unchanged. The stock of office space increased by 8,000 sqm, while retail space increased by 25,000 sqm.

The islandwide vacancy rate of office space at the end of second quarter fell to 9.8 per cent, from 10.2 per cent at the end of the first quarter. Vacancy rate of retail space rose to 7.2 per cent, up from 6.8 per cent in the previous quarter, URA said.

Source : Channel NewsAsia – 24 Jul 2015

Office rents in CBD remain sluggish in Q2: DTZ

Average office rents in the Central Business District (CBD) area in the second quarter of the year stayed flat quarter-on-quarter at S$10.85 per sq ft, property consultant DTZ said in a news release on Wednesday (Jul 1).

According to DTZ, the slowdown in rental growth was also a result of slower demand in the face of uncertain global situations such as the risk of a sharp correction in China’s real estate market, or the possible default and exit of Greece from the Eurozone. However, it said the net demand growth in the CBD was still positive.

In H1 2015, net demand was 526,000 sq ft, almost 90 per cent higher than the 277,000 sq ft registered in H2 last year. Office occupancy in Raffles Place grew the most by 4.1 percentage points to 96.6 per cent and occupancy rates in the Beach Road/North Bridge Road micromarket inched up by 0.7 percentage point in Q2, DTZ added.

As for the average monthly gross rents in Marina Bay, it remained the highest at S$13.75 per sq ft, followed by Raffles Place at S$10.80 per sq ft, it added.

While rents were supported by the lack of new completions for the rest of 2015, DTZ said leasing activity was modest on the back of the 4.45 million sq ft of pipeline supply in 2016. Major 2016 developments in the CBD include Guoco Tower, Marina One, and Duo Tower totalling about 3.3 million sq ft.

Ms Cheng Siow Ying, DTZ’s Executive Director of Business Space, said: “With a large supply coming on board in the second half 2016, firms will have more premium and Grade A office options in the CBD and fringe locations.

“Some firms may take this opportunity to relook and strategise consolidation or expansion plans, while others may employ a wait-and-see approach through the supply wave of 2016. Notwithstanding, prime office space is still likely to command a premium, especially for iconic developments like Marina One and Guoco Tower.”

Source : Channel NewsAsia – 2 Jul 2015

Demand for shophouses grows as office rents continue to rise

With their colourful facade and distinctive five-foot way, shophouses are reminiscent of Singapore’s past. But even in today’s modern business environment, there is still a demand for them.

At Amoy Street, such shophouses have been taken up by creative outfits, restaurants and even small businesses who are looking for cheaper office space. With office rents already going up by 9.8 per cent in the last year, property observers have said that they expect demand for shophouses to pick up going ahead.

As of the last quarter of 2014, median office rents in the downtown core area stood at about S$10.50 per square foot per month. Shophouses, however, have significantly lower rents.

Ms Christine Li, director of research at Cushman & Wakefield, said: “If you compare the rents for shophouses and office buildings in the Central Business District (CBD), it is really at about half-price.

“It appeals to people and tenants, particularly those from the creative industries, who do not need the Grade A specifications but still want to be in the CBD, close to their clients. So without paying S$10 per square foot per month for a Grade A office building, they can just pay S$5 to S$6 for a shophouse next to it.”

According to a recent report by property consultancy Colliers International, before 2012, quarterly median rents remained generally below S$4 per square foot a month. That is compared to S$5.42 per square foot per month in the fourth quarter of last year.

However, while rents have gone up, shophouses are not necessarily the best asset class to invest in. Their rents have seen lower growth as compared to the rise in capital value, according to consulting firm Chestertons Singapore.

Mr Donald Han, managing director of Chestertons Singapore, said: “Your yield for conservation shophouses these days is at about 1.5 to 2 per cent, definitely less than 3 per cent.

“For investors looking at shophouses as an investment class, despite it being limited in number, they would have to hold on to an asset with lower returns, compared to other asset classes like residential that might give in excess of 3 to 4 per cent. Commercial strata offices might give you yield of about 3 to 5 per cent, industrial maybe about 7 per cent.”

Since the start of 2015, 25 shophouses have been sold, according to the Urban Redevelopment Authority.

Source : Channel NewsAsia – 20 Apr 2015

Singapore prime office rent forecast to rise 5-7% in 2015: Knight Frank

Prime office rent in the Republic is expected to rise by 5 to 7 per cent in 2015, helped by the lack of new office space in the next two years, real estate services firm Knight Frank said on Wednesday (Dec 31).

Knight Frank said that while more firms in the technology, media and internet sectors are looking to relocate to prime office spaces, the amount of new office space coming onto the market next year is likely to fall to around 1.15 million square feet, down from 1.87 million square feet in 2014.

The estimated supply for 2016 is 1.60 million square feet, while 2017 will see the main bulk of new office supply of about 4.69 million square feet.

In view of the large upcoming supply of office space in 2017, landlords are asking for longer five- to six-year lease agreements instead of the traditional three-year lease for office space, Knight Frank said.

Knight Frank said Grade A plus offices in the Raffles Place and Marina Bay area now command rents of S$10.70 to S$13.40 per square foot per month – an increase of 6.9 per cent from a year ago.

In the Orchard Road area, office rents are currently between S$7.50 and S$10.50, a rise of 1.5 per cent from a year ago, while the going rate for offices at City Hall, Marina Centre and Suntec area is S$9.50 to S$11.30 – up just 0.9 per cent year-on-year.

As a result of the rising differential, new developments on the fringes of the central business district (CBD) have attracted interest from various tenants “due to the lower rents compared to core CBD, high quality building specifications with vantage views, less traffic congestion and more available space choices in these precincts”, Knight Frank said.

Source : Channel NewsAsia – 31 Dec 2014

Good prospects for Bugis-Beach Road office submarket: Analysts

South Beach Tower at Beach Road has yet to open its doors to corporate tenants, but analysts have said it has already had an impact on office rents in the vicinity. Over the next 10 years, the Bugis-Beach Road office submarket could become a preferred choice of location for cost-conscious businesses.

The S$3 billion South Beach project has some 500,000 square feet of office space, and tenants are expected to start moving in next year. About 80 per cent of the space has already been leased at a monthly rental rate of S$9 to S$12 per square foot, according to the South Beach Consortium earlier this month. The South Beach project is a joint venture between City Developments and Malaysia’s IOI Group.

Knight Frank’s head of consultancy and research, Ms Alice Tan, said South Beach has helped to lift rents somewhat at other office buildings in the area. “For the last few quarters this year, we saw that rentals in the Suntec area have been creeping up to even beyond S$10 per square foot,” she said.

“One of the good-quality buildings in Beach Road is The Gateway – last year, rents were slightly below S$7 per square foot, as of this year, they were between S$7.20 and S$7.50. As for Bugis Junction Tower, which is right next to Bugis MRT station, rents are up to S$8 per square foot,” she added.

With another mixed-development project, Duo, expected to be completed in 2016, analysts said prospects for the Bugis-Beach Road area are looking up. Said Mr Ku Swee Yong, CEO of Century 21 Singapore: “Over the mid to long term, I believe the area around City Hall to Bugis MRT should have a lot of interest from commercial space users, partly because the transport infrastructure is undergoing a lot of revamp now.

“We will be seeing a new MRT line, and in probably another six to eight years, you will see the North-South Expressway also exiting from the Rochor area.”

Analysts added that the area could potentially prompt businesses keeping a tight eye on their budgets to consider moving from the Central Business District (CBD). According to Colliers International, monthly rents for premium grade office space in the Raffles Place and the new Downtown came in at S$11.67 per square foot in the third quarter, while Grade A offices went for S$10.25 per square foot.

Knight Frank said the anticipated increase in the working population in the Beach Road area will have a positive spillover effect on demand for retail and recreational amenities in the vicinity, and this could boost retail rents in the area in the next two to three years. However, an address in the CBD is still attractive, so Knight Frank said it expects more reshuffling activities there as landlords compete for lease renewals and new tenants.

Source : Channel NewsAsia – 29 Dec 2014