Tag Archives: Singapore Office

Tanjong Pagar Centre game-changer for GuocoLand

GUOCOLAND, controlled by Malaysian tycoon Quek Leng Chan, recently completed Guoco Tower – the office component of its integrated mixed-development project, Tanjong Pagar Centre, on a 99-year leasehold site above Tanjong Pagar MRT Station.

The mainboard-listed property group has announced that 80 per cent of the 890,000 sq ft net lettable area of office space has been committed, that is either leased or subject of advanced leasing discussions. Guoco Tower obtained Temporary Occupation Permit (TOP) in September.

At the same time, part of Tanjong Pagar Centre’s 100,000 sq ft retail component also received TOP. The rest of the retail space as well as the 222-room Sofitel Singapore City Centre and a 181-unit residential component are slated to receive TOP in stages from late this year to early next year. The retail component is more than 80 per cent committed.

Office and retail tenants have started to move in.

The mixed-development project has an estimated gross development value of S$3.2 billion. GuocoLand paid S$1.708 billion or S$1,006 per square foot of potential gross floor area for the Tanjong Pagar Centre site, which it clinched at an Urban Redevelopment Authority tender in 2010.

Now, Tanjong Pagar Centre is set to transform GuocoLand, significantly boosting its recurring income base. The Business Times’ back-of- the-envelope calculation shows that when the asset is fully operational and has stabilised, it could generate Ebitda (earnings before interest, tax depreciation and amortisation) of around S$93 million per year.

This assumes that the office and retail components have been fully leased at average gross effective monthly rentals of S$9 per square foot for the offices and S$15 psf for the retail space; it also assumes that the hotel commands an average room rate of S$400 per night with 80 per cent average occupancy.

GuocoLand owns 80 per cent of Tanjong Pagar Centre – the Employees Provident Fund of Malaysia holds the balance 20 per cent stake – so GuocoLand would stand to receive an annual Ebitda boost of about S$75 million for its attributable share of Tanjong Pagar Centre.

This will help augment GuocoLand’s pool of recurring income, which currently is pretty small – from sources such as the 20 Collyer Quay office block in Singapore, a few hotels in Shanghai and Malaysia, and a small mall within the Guoson Centre mixed-development in Shanghai.

Once Tanjong Pagar Centre is stabilised, this huge leap in recurring income from the office, retail and hotel components will not only provide ballast to GuocoLand’s earnings, but will also smoothen the volatility in income from property development. As well, the stable cashflow will enhance the group’s resilience and enable it to seize growth opportunities.

Besides anchoring the group’s ambitions of building a strong base of recurring income, Tanjong Pagar Centre will generate property development income from the sale of apartments in the 181-unit Wallich Residence, sitting atop the offices in a 64-storey tower.

Apartments start from level 40, at a height of about 190 metres. So far 16 have been sold – all at above S$3,000 psf. The group will likely launch a fresh marketing campaign when the residential component has been completed around early 2017, to give potential buyers a sense of the views they will enjoy from the height.

Wallich Residence’s 21,108 sq ft super penthouse on the top three levels of the 64-storey tower reaches a height of 290 metres – making it Singapore’s tallest residence.

Through these upmarket residences in the CBD, Tanjong Pagar Centre will reinforce another strategy GuocoLand has been building on in recent years – that of focusing on the high-end residential market.

In Bukit Timah, the group is left with just a three-bedroom penthouse at the 210-unit Goodwood Residence.

At another freehold completed project, the 381-unit Leedon Residence, GuocoLand is left with 109 units. The average price achieved so far is just below S$2,000 psf and the group could be mulling over a bulk sale. The group’s next high-end residential project here will be a 450-unit condo in Martin Place on a site clinched a few months ago.

GuocoLand could tap a modest revival in investment interest in Singapore’s high-end housing market, which took a more severe beating compared to other segments in the initial stages of the current residential downcycle.

In addition to Tanjong Pagar Centre, other drivers of recurring income could be in the offing for GuocoLand. Its Bursa Malaysia-listed subsidiary, GuocoLand Malaysia, is developing Damansara City in Kuala Lumpur. The project is expected to be operational in 2017 and GuocoLand Malaysia has retained within the development an office tower, a hotel and retail mall for recurring income. In the medium term, Singapore-listed GuocoLand itself could develop future phases of its Guoson Centre commercial site in Shanghai and retain them for rental income.

GuocoLand does seem to have some good things going for it. That said, it does not receive much coverage from stockbroking houses, principally because the stock is relatively illiquid. With Mr Quek controlling about 70 per cent of the company, the group has a small free float of about 21 per cent. The average daily volume for the counter over the past one year is 231,000 shares. This may be small for institutional following but could still be comfortable for some smaller funds and retail investors.

GuocoLand’s market cap is S$2.3 billion. As at Sept 30, 2016, its gearing was 0.9 times.

Rumours periodically surface that Mr Quek could take the company private to take advantage of the discount at which it is trading.

Based on Tuesday’s closing price of S$1.915, GuocoLand is trading at 44.5 per cent discount to CIMB analysts Lock Mun Yee and Yeo Zhi Bin’s S$3.45 estimated revalued net asset value per share for the counter.

A human centric approach to designing the future workplace

THE concept of the workplace is evolving. Historically, the quest was to design the perfect workplace focused on the infrastructure and physical design, taking into account technological transformations, with business cost efficiency being a major driver. This approach, however, often neglected the human aspects and how the talent interacted in and around the space and how productivity was maximised.

This “single serving” mentality – buildings to house workers and workstations for employees – ignores the potential to transform urban spaces in cities worldwide into more holistic and human-centric precincts. As a result, commercial areas, especially central business districts (CBDs) around the world, turn into dead areas after dark and on the weekends. But it need not be this way.

A number of designers and developers are taking the lead with a more holistic, and more importantly, a more human-centric approach to designing the workplace and the ecosystem around it. The benefits are multi-fold – not only can employee talent be served better by increasing their productivity and well-being, the surrounding community may benefit as well.

Where the future works

This is what urban regeneration is about – as cities house more people than ever before, buildings need to be designed and constructed with people foremost in mind.

Many urban regeneration projects around the world are doing exactly that. From the vast Barangaroo South precinct in Sydney to International Quarter London, the centre of Europe’s largest urban development, these large-scale projects are transforming not just the skyline but also creating environments that are fit for the future way of working.

The common thread among each of these industry-leading developments is the fact that they are not just one-dimensional workplaces. Each is designed to be mixed-use projects from the very start, integrating a variety of asset classes – including shops, hotels, offices, parks, residences and leisure and entertainment offerings, providing a broad spectrum of amenities and experiences for the working population.

The workplace of the future will be part of a greater eco-system of amenities and complementary businesses, bringing together large public spaces, vibrant round-the-clock retail, leisure and entertainment options and seamless transport connectivity.

These future workplaces will also have a strong community focus, building in broad-ranging cultural, living, and working spaces, catering not just for the wellness of inhabitants, but for their well-being.

Closer to home, the ambitious Jurong Lake District and other up-and-coming business hubs in Buona Vista, Woodlands Central and Paya Lebar Central represent a similar take on the future of workplaces – which are not just for business but also offer inclusive community spaces for the broader population.

Connected and inclusive

With progressive cities such as Singapore moving towards being more car-lite, future workplaces will not just be easily accessible via public transportation networks, but also have dedicated amenities to support the needs of other active mobility methods.

End-of-trip facilities with bicycle parking, lockers, changing rooms and showers will be ubiquitous in future workplaces, supporting cyclists’ and joggers’ commutes to work.

Workplaces of the future will be sustainable hubs that seamlessly integrate social, leisure and work spaces. With this hub model, amenities and services do not just serve workers during working hours, but also the catchment of residents within the development and in the vicinity, acting as a gathering place where residents and visitors are able to connect with one another.

To transform the face of the workplace, there will also be curated retail and entertainment options that reinvent the entire development into a destination in and of itself.

For example, instead of the usual shopping complex serving the lunchtime crowd, future workplaces will feature alfresco dining streets, lush green spaces and multi-purpose plazas for community events or pop-up concepts.

Collaboration and concentration

The recent trend in workspace concepts is undeniably more human-centric compared to the past, with employers embracing the productivity benefits that open-plan spaces and hot-desking provide. The future of work is seen as much more collaborative and flexible, responding to the behaviours and working culture of the millennial generation.

A CBRE paper on workspace preferences by different generations revealed that while millennials do value spaces meant for socialising more than other generations, the most important spaces to them are those that allow them to think and concentrate.

In addition, the paper also found that millennials actually spend slightly more time doing individually focused work compared to their older colleagues. What this means is that workplaces of the future should allow for flexible designs and account for a broad variety of needs, such as private nooks where employees can focus their thoughts, providing a holistic rather than a homogenous environment for all.

Healthy and happy

Apart from having progressive fit-outs, the future workplace should promote the overall well-being of occupants. Beyond taking care of the physical wellness of inhabitants, ensuring well-being actually goes one step further, to a state where employees are both healthy and happy.

Developers globally are recognising that there should be metrics to account for the shift towards assessing the well-being of workplaces. In Singapore, the Building and Construction Authority’s Green Mark 2015 parameters include human-centric assessments on indoor air quality, lighting and acoustics, among others.

The improvements to productivity brought by a focus on employees’ well-being are not intangible – a JLL research found that both improved acoustics and privacy boost productivity by 6 per cent each, while improved views, lighting and daylighting increase productivity by 5.5 per cent. Improved air quality also mitigates problems caused by the “sick building syndrome”, cutting down short-term sick leave by 35 per cent according to one study.

In short, beyond function-driven approaches of providing fittings and layouts, a holistic approach to well-being ensures that every company’s most valuable resource – its employees – are well looked after.

Designing the future workplace involves looking beyond a functional office, to also creating a civic central for talent to flourish.

By RICHARD PAINE – managing director, Paya Lebar Quarter by Lendlease

Narrowing gap between Grade A and B office buildings

ACCORDING to the Ministry of Trade and Industry, Singapore’s economy grew 2.1 per cent year on year (y-o-y) in Q2 2016, the same rate of growth as the previous quarter.

With looming concerns over the weaker global outlook and the impact of Britain’s vote to leave the European Union, its economic growth forecast for 2016 also narrowed to 1 per cent to 2 per cent instead of the 1 per cent to 3 per cent projected earlier.

Concerns over the global economic climate continued to dampen Singapore’s business outlook which in turn negatively impacted the performance of the office market.

Net new demand remained muted with few expansion plans and more modest space requirements from fewer new market entrants.

 

All these come at the same time as an upcoming wave of new development completions.

As a result, the rental premium between Grade A and Grade B buildings has narrowed, spurring occupiers to make a “flight to quality” move to premises at more competitive rentals.

As at Q2 2016, the average Grade A CBD Core rents tracked by CBRE Research have declined for the fifth consecutive quarter, contracting 4 per cent quarter on quarter (q-o-q) to S$9.50 per square foot per month (psf/month). The average Grade B CBD Core rents also corrected by 3.8 per cent to S$7.65 psf/month.

Generally, CBRE Research defines a Grade A building as a landmark building with modern flexible layout and floor plates above 18,000 square feet (sq ft). The building size is above 300,000 sq ft and offers underground parking and good lift services zoned for passengers and goods delivery.

It offers high technical specifications (such as raised floors, 24-hour cooling system) and good quality building services (for example, security, CCTV), and is professionally managed. The building should also be located close to public transport.

Out of a CBD Core office stock of about 27.6 million sq ft, approximately 43 per cent of this stock is classified Grade A CBD Core. The rest of the office stock is classified Grade B CBD Core.

Highly sought after

Grade A buildings are highly sought-after especially by multinational institutional occupiers as they offer modern office features with large contiguous, often column-free space, with modern specifications as well as prestige.

Rents for such office buildings therefore are transacted at a premium over other buildings that do not necessarily meet all the Grade A features and specifications. The latter is generally classified Grade B.

This rental premium can be seen in the chart where the rental premium of the average Grade A CBD Core over Grade B CBD Core office rents is shown.

The chart shows that the rental premium is currently 24 per cent. This is the lowest for a 10-year period from Q1 2006 to Q2 2016 in light of current weak office demand and rental conditions.

Nonetheless, while the 10-year average rental premium is 36 per cent, it should be noted that this is propped up by the high rental premium achieved during the period from 2007 to 2009 when the average Grade A CBD Core rents rose at a faster pace than the average Grade B CBD Core rents.

Being more representative of recent market conditions, the five-year average rental premium is slightly lower at 30 per cent. This is also a reflection of a less volatile Grade A market in the recent cycles.

With the current rental premium 6 per cent lower than the five-year average, occupiers are enticed by the opportunity to locate their operations in Grade A buildings. “Flight to quality” has been driving leasing commitments to Grade A office developments.

Developers of upcoming Grade A office buildings especially have found it necessary to offer very competitive pre-lease terms in order to secure leasing commitments.

Faced with increased competition, existing landlords have also sought to retain occupation through the structuring of new renewal deals. They have found it necessary to adjust to market conditions with more competitive pricing and flexibility in leasing terms.

Unsurprisingly, Grade A rents continue to correct faster than their Grade B counterparts.

With limited net new office demand, office leasing deals are mainly driven by a “musical chairs” movement from one building to another. Grade B buildings that have hitherto enjoyed relatively high occupancy levels will thus face greater challenges to retain their existing tenants or attract new tenants.

In the past six to 12 months, a marked increase in leasing activity in the Grade A market was observed, bolstered by this “flight to quality” movement and occupiers taking advantage of attractive terms on offer. It should be noted that these opportunistic leasing deals were primarily focused on new Grade A projects and a few large deal negotiations have been reported.

Vacancy rate

With no new completions this quarter, the vacancy rate for the Grade A CBD Core office market remains relatively stable, registering only a marginal increase from 5 per cent to 5.2 per cent. The vacancy rate for Grade B CBD Core remains at 4.6 per cent q-o-q.

However, it should be mentioned that the CBD Core office market will not be able to enjoy such low vacancy levels for long.

Vacancy levels are expected to rise sharply over the next six to nine months with the physical completions of a number of new developments which collectively offer a significant amount of space available for lease.

Despite the Grade A market benefitting more from the “flight to quality” moves, it should be noted that all is not lost for the Grade B office market.

Not all potential office occupiers require Grade A specifications for their occupation needs. Some occupiers, especially smaller-scale businesses, do not require large floor plates or high specifications. They prefer low occupancy cost and low price volatility.

Hence, landlords of Grade B buildings should find ways to cater to SMEs and include them as another source of demand alongside traditional large occupiers.

While it is clear that the smaller space requirement of SMEs limits their potential leasing demand and they are unlikely to ever match the role large companies play in office space take-up, CBRE Research believes there is still a role for them alongside large corporations as a supplementary office demand driver.

What they lack in scale, they make up for in numbers. This is predicated on a strong SME and startup growth trend, that SMEs will be a distinct focus for the government as well as the rise of the sharing economy. Thus stability in the Grade B market is expected in the mid to long term.

This is an opportune time for landlords to relook the way the office leasing format has traditionally been run. This is not to say a revamp should be on the cards but there is definitely room on the part of landlords to incorporate greater flexibility in office space use to target SMEs.

The potential benefits far outweigh the costs involved. With a little effort, landlords will be able to capitalise on a relatively untapped pool of demand that is expected to grow from strength to strength.

Looking ahead, while the market is affected by the weak global economic outlook and caution has surfaced around the large future stock due for completion over the next six to nine months, the narrowed premium for Grade A rents has seen some encouraging leasing activity among the new developments over the past couple of quarters and may in due course help to build some momentum for the office sector.

Return to growth

While the short-term outlook remains weak, CBRE Research believes that the market may return to growth beyond end 2017 once the supply wave passes and assuming prospects for the underlying economy improve.

The rental premium between the Grade A and Grade B office market may widen slightly back to five-year historical levels of about 30 per cent.

However, because of decentralisation options, a constantly improving quality of office stock as well as a pro-actively managed future supply, this rental premium is not expected to surpass levels last seen from 2007 to 2009.

Singapore’s prime office rents to bottom in 2018: Knight Frank

A FLIGHT-TO-QUALITY among office occupiers is weighing down on rents and occupancies at older Grade A office buildings, where more space will be freed up as these tenants move into new prime offices.

This is giving rise to a “two-tiered performance” in the prime office market, with Grade A offices seeing steeper declines in rents than the so-called “Grade A-plus” offices in the coming quarters. Average office rents will continue to fall before bottoming out in 2018, property consultancy Knight Frank projects.

These Grade A-plus offices refer to newer buildings with better specifications in the prime office market.

With the downside risk in office rents already well-documented ahead of looming completions of massive projects, market observers have started speculating when the bottom will be reached.

But some analysts are expecting the bottom to arrive sooner. DBS Group Research and Religare are tipping a bottom in the second half of 2017; Maybank Kim Eng has projected a bottoming-out of office rents over the next five to six quarters, which suggests Q4 2017 to be the earliest for that to happen.

Knight Frank head of office Calvin Yeo said: “Competition for tenants will be rife, particularly among buildings vying to backfill vacancies from tenants relocating to quality (spaces) over the upcoming quarters.

“Buildings with significant net lettable area (NLA) due for lease renewal from now till 2018 will continue to be under threat of losing tenants to quality buildings,” he added.

During the third quarter, Grade-A office space in the Raffles Place/Marina Bay district saw the largest quarterly decline of 2.9 per cent in monthly gross effective rents (which exclude fit-out period but include rent holidays and service charges) to S$8.20-8.70 per square foot (psf). This is followed by a 2.7 per cent fall for Grade A office spaces in the Marina Centre and Suntec City areas to S$8.10-8.60 psf.

The pursuit of tenants by upcoming office projects in recent quarters has been at the expense of older Grade A buildngs, which will see some tenants moving out soon when those swanky new buildings are completed.

The Business Times had earlier reported a slew of pre-lease commitments inked in new projects. ING, which now occupies 70,000 sq ft at Republic Plaza, is close to securing a similar amount of space at Guoco Tower in Tanjong Pagar Centre. Itochu Singapore, also currently at Republic Plaza, is also taking up 28,000 sq ft at Guoco Tower.

Communications agency Dentsu Aegis Network, which now operates from 77 Robinson Road and has member firms in several other locations, is said to be finalising a lease for about 90,000 sq ft at Guoco Tower.

Cybersecurity company Palo Alto Networks is moving out of its 20,000 sq ft of space at Millennia Towers to take up some 36,000 sq ft at Guoco Tower.

Amadeus, a global IT solutions provider for the travel industry, now occupies over 20,000 sq ft at Parkview Square in North Bridge Road and is said to be taking up a lease for 36,000 sq ft at Guoco Tower.

Swiss private bank Julius Baer, which has inked a lease at close to double-digit rent for a “high density floor” spanning 100,000 sq ft at Marina One, is slated to give up its 72,000 sq ft of space spread over two floors at Asia Square Tower 1.

“Upcoming vacancies in Grade A buildings will increase in the next two years as these tenants relocate, and put pressure on rents as a result,” Mr Yeo said.

A skyscraper index released by Knight Frank this month, which tracks rental performance of commercial buildings over 30 storeys high, showed that prime office rents on the upper floors of Singapore skyscrapers are the eighth most expensive globally.

Asia-Pacific cities saw the highest rental growth, with towers in Shanghai recording the strongest growth in the world of 7.6 per cent in the first half, followed by Sydney, Hong Kong and Taipei. Singapore bucked that trend with a 7 per cent drop.

CLSA unit said to be doing due diligence on 77 Robinson Rd

CLSA Capital Partners is said to have been selected to do exclusive due diligence for the purchase of 77 Robinson Road.

The pricing is believed to be above S$530 million, or slightly above S$1,800 per square foot based on the net lettable area (NLA) of nearly 293,270 sq ft.

Formerly known as Singapore Airlines (SIA) Building, the 35-storey office tower is on a site with 99-year leasehold tenure that started on Feb 18, 1994; the balance lease tenure is about 76.5 years.

What is interesting about CLSA being picked for exclusive due diligence is that it was an earlier CLSA-managed fund that had sold the office tower to the current owner – SEB ImmoInvest fund, which used to be managed by the former SEB Asset Management, which was acquired by Savills Investment Management in September last year. The earlier CLSA fund had sold 77 Robinson Road in April 2007 for S$526 million or S$1,783 psf based on a slightly larger NLA of around 295,000 sq ft for the property at the time.

Word on the street is that in a recent expression of interest exercise for 77 Robinson Road, at least one other party – tipped to be either CapitaLand or its unit CapitaLand Commercial Trust (CCT) – offered a higher price than CLSA, apparently around S$1,850 psf. However, it seems CLSA was the only party agreeable to the vendor’s preference for an outright asset sale instead of a sale of shares in the special purpose vehicle (SPV) that owns 77 Robinson Road.

An outright purchase of the building would attract the usual buyer’s stamp duty of up to 3 per cent – much higher than the stamp duty rate payable on share purchases, of 0.2 per cent of the net asset value or the market value of the company, whichever is higher. Hence a potential buyer looking at an asset purchase rather than a share purchase in an SPV would typically adjust its price downwards to factor in the higher stamp duty expense.

Moreover, CLSA Capital Partners’ thorough knowledge of the asset, positions it well to conclude a swift deal, which is probably what the vendor is also eyeing, say market watchers.

The earlier CLSA-linked fund that sold the building in April 2007 had acquired it 10 months earlier, in June 2006, for S$343.88 million or about S$1,165 psf, from Singapore Airlines.

CBRE is said to have conducted the recent expression of interest on behalf of Savills Investment Management on the property which closed last month. It declined to comment when contacted by The Business Times.

77 Robinson Road’s maximum development potential has been tapped. Under the Urban Redevelopment Authority’s Master Plan 2014, the site is zoned for commercial use with an 11.2+ plot ratio (ratio of maximum potential gross floor area to site area).

Nevertheless, there may be scope to do some asset enhancement work on the property, presenting potential upside for a new owner, say observers. Among other things, some of the car parking space may be converted to commercial use: the building currently has 180 car parking lots. In addition, some of the air handling units could be decanted to free up spare GFA. There is also scope to spruce up and reconfigure the entrance lobby and upgrade common area.

One negative factor for 77 Robinson Road is that Dentsu, a major tenant, is expected to exit the building; its parent Dentsu Aegis Network is said to be finalising a lease for about 100,000 sq ft at the nearby Guoco Tower. The group will move out of several locations on the island, according to market talk.

110 Robinson Rd sold at S$45.1m to Indonesian tycoon Tahir

A STRING of commercial property transactions has taken place recently.

These include a 12-storey freehold office block at 110 Robinson Road, owned by OCBC, which has sold it to Indonesian tycoon Tahir. The sale will be completed in three months, a spokeswoman for the bank said when contacted by The Business Times.

The price is understood to be S$45.1 million or nearly S$3,169 per square foot based on the net lettable area of 14,233 sq ft. The property is between Finexis Building at 108 Robinson Road and Robinson 112.

BT reported earlier that Mr Tahir was the highest bidder.

Cushman & Wakefield conducted the tender for OCBC. “The tender, which closed on July 26, drew a handful of bids,” said Shaun Poh, executive director of capital markets at C&W.

While most observers would consider the S$3,169 psf that Mr Tahir is paying for 110 Robinson Road to be bullish, Michelle Lek of Quillion Global, who acted for Mr Tahir in the transaction, said the property presented a “rare opportunity to acquire a freehold office building with a Robinson Road address for under S$50 million”.

Also changing hands are six of the nine strata retail units on the second level of Holland Road Shopping Centre – along with an industrial unit at 211 Henderson – offered at a tender conducted by CBRE and which closed last month.

Four adjoining strata office units at The Adelphi, a 999-year leasehold property near City Hall MRT station, are being sold for S$20.7 million or about S$2,365 psf on the total strata area of 8,751 sq ft. The buyer is believed to be the Singapore Academy of Law (SAL).

A body established by Statute, SAL is the promotion and development agency for Singapore’s legal industry, tasked with the vision of making Singapore the legal hub of Asia.

SAL is currently located in the Supreme Court Building next to The Adelphi. When contacted, the Academy said last Friday that it is looking at the purchase of office space close to the Supreme Court. “The move will enable SAL to house its operational units at its own premises instead of paying rent to the Supreme Court. The SAL secretariat will also share our plans and ideas with our committee members in the coming months. More details will be announced by Chief Justice Sundaresh Menon in his Opening of Legal Year Speech in January 2017.”

The four units are being sold by a party who had bought them in 2011, partly for own use and partly for investment.

CBRE confirmed it brokered the deal but declined to comment further.

Over at the freehold Holland Road Shopping Centre, various members of the Lim family behind Lim’s Arts and Living have picked up five retail units. The units are part of nine units on the second level of the four-storey mall that were put up for tender by CBRE on behalf of their owners, two companies controlled by the Lim family. A sixth unit has been sold to an unrelated party.

The six units, with sizes between 237 sq ft and 732 sq ft, were transacted at S$4,346 psf to S$5,403 psf. Absolute prices ranged from S$1.12 million to S$3.95 million. The balance three retail units will be put on the auction block jointly by CBRE and Colliers at the latter’s auction on Sept 21 at Amara Singapore in Tanjong Pagar.

When contacted, Sammi Lim, director of investment properties at CBRE, said the tender, which closed on Aug 23, was “open to participation by anybody including the (Lim) family members”. All six units that have been sold went to their respective highest bidders.

Ms Lim added that the three unsold units to be auctioned drew some bidders but they had packaged their offers together with some of the other six units that were sold. “As a result, the owners decided to offer them at a separate auction,” she added.

The August tender also included a 4,962 sq ft strata freehold industrial unit on the second level of 211 Henderson, which has also been sold for S$2.98 million or S$600.56 psf, Ms Lim revealed. The buyer is not linked to the Lims.

ARA said to clinch deal to purchase Capital Square office tower stake

ARA Asset Management Ltd has won the bid for a stake in Singapore’s Capital Square office tower in the city’s central business district, according to people familiar with the matter.

ARA, which is listed in Singapore, is buying the 50 per cent stake in the building that was put up for sale last year by Alpha Investment Partners, said the people, who asked not to be identified because the process is private.

The purchase will be concluded by month-end, one of the people said, without disclosing the price of the deal.

The 16-story prime office building in the Raffles Place financial district was expected to fetch about S$2,500 per square foot, valuing the 50 per cent stake at roughly S$415 million, according to an estimate from Donald Han, a Singapore-based managing director at real estate broker Chestertons.

The transaction will add to a recent spate of deals in Singapore’s business district as falling rents and a large supply of prime space have pushed valuations lower.

The tower, whose tenants include Morgan Stanley, Bloomberg LP and Citigroup Inc, was bought by Alpha and insurer NTUC Income in 2011 from Munich Re for S$889 million, or about S$2,300 per square foot.

ARA declined to comment in an e-mailed statement.

Capital Square, which is spread out over 388,215 square feet, was built by developer Keppel Land and completed in 1998.

CBRE Group Inc and Jones Lang LaSalle were appointed to market Capital Square, they said in a joint statement in April 2015.

Singapore high-rise office rents decline by 7% as demand slows

Singapore landlords are paying the penalty for a slowing economy. Alone among the world’s major cities, the cost of renting an office with panoramic views is falling as supply outstrips demand.

Annual rents on the upper floors of Singapore’s skyscrapers fell 7 per cent to about US$775 a square metre in the first six months, according to a 23-city index compiled by Knight Frank LLP.

The biggest increase was in Shanghai, where rents climbed 7.6 per cent to US$774. In Hong Kong, the most expensive market, rents rose by 5.9 per cent to US$2,996 a square metre, the broker said.

“There’s a classic imbalance in the Singapore market,” said Will Beardmore-Gray, head of Knight Frank’s tenant representation and agency business.

“They had relatively high supply and this has been exacerbated by a poor-performing economy and over development.”

Vacancy rates in Singapore were 9 per cent in the second quarter, compared with 3.3 per cent in Shanghai, Knight Frank data show. The city-state’s economy will shrink 0.1 per cent in the third quarter, according to a survey of 26 economists conducted by Bloomberg News in the week through Sept 13.

Demand for Shanghai office space has been lifted by the technology and creative industries, Mr Beardmore-Gray said. The city has created 300,000 jobs in those sectors since 2009 and is expected to add 100,000 more by 2020, he said.

Manhattan skyscraper rents increased 1.9 per cent to US$1,701 per square metre during the first half, the second-highest in the index, while those in Tokyo and the City of London district were unchanged at US$1,610 and US$1,226 respectively.

Marina One gains from ‘flight to efficiency’

PRE-COMMITMENT leases and rents for upcoming prime offices are picking up as occupiers are warming to these upcoming swanky buildings with large floor plates in a “flight to efficiency”.

Swiss private bank Julius Baer has signed a lease at close to double-digit rent for a “high density floor” spanning 100,000 square feet at Marina One. Julius Baer is slated to give up its 72,000 sq ft of space spread over two floors at Asia Square Tower 1 when it moves into Marina One, which will be completed next year.

At another integrated project, Tanjong Pagar Centre, a recent flurry of office leases inked has raised Guoco Tower’s pre-commitment leases to over 70 per cent for its 890,000 sq ft of prime Grade-A office space. This signals a remarkable pace since January when the pre-commitment level was only 10 per cent.

Effective rents at Guoco Tower have also ranged from S$7.50 per square foot per month (psf pm) to over S$10 psf pm, according to sources.

Developers of Marina One and Tanjong Pagar Centre, M+S and GuocoLand respectively, declined to comment on their leasing deals nor offer rental details.

But BT understands that ING, which now occupies 70,000 sq ft at Republic Plaza, is in advanced negotiations for a similar amount of space at Guoco Tower.

Sources also said that Guoco Tower had of late secured tenants such as Palo Alto Networks, which is moving out of its 20,000 sq ft space at Millennia Towers to take up some 36,000 sq ft at Guoco Tower.

Itochu Singapore, currently at Republic Plaza, is taking up 28,000 sq ft at Guoco Tower, while Amadeus, a global IT solutions provider for the travel industry that now occupies over 20,000 sq ft at Parkview Square in North Bridge Road, is said to be taking up a lease for 36,000 sq ft at Guoco Tower.

Meanwhile, the new UIC Building has just secured its first pre-commitment lease from JustOffice, which will open serviced offices there spanning 40,000 sq ft.

Such steady absorption marks good news for the market amid the completion of some 3.5 million sq ft of new office space within the next 12 months. But market watchers note that effective rents for most leases inked are still in the single-digits for prime Grade-A office in the CBD after factoring in incentives such as rent-free periods.

“With economic uncertainties and businesses not growing, rents will be kept in check,” said Calvin Yeo, head of office at Knight Frank. Recent leasing activities have been driven by upcoming lease expiries, which will soon free up a lot of secondary space especially in older buildings.

Data from Cushman & Wakefield shows that the weighted effective rents in Marina Bay area stood at S$9.56 psf pm in the second quarter, a 27.7 per cent fall from the Q1 2015 peak, while that in the Shenton Way/Tanjong Pagar area was S$7.65 psf pm, about 10.1 per cent below the Q1 2015 peak.

Cushman & Wakefield research director Christine Li observed that over the last three decades, weak office absorption seems to happen only when there is a crisis. “In the absence of an external shock, the office absorption tends to be quite stable despite periods of high office supply. This could imply that the underlying demand for office space in Singapore is still healthy, and the city state always has the capacity to absorb the supply over time.”

With office tenants relocating from older buildings into newer and more efficient ones, CBRE executive director for office services Michael Tay projects a rental trend divergence.

While rents in new buildings will edge up, older buildings will have more competitive rents in the next 12-18 months, Mr Tay said. Commenting on Guoco Tower, he noted that its retail, hotel and F&B offerings as well as a direct link to the MRT are attractive to tenants.

Large floor plates in new developments are a draw for companies seeking workspace flexibility and efficiency, industry players noted. Duo Tower, an M+S project, offers the largest floor plate in the Bugis micro-market of up to 31,000 sq ft; Guoco Tower’s column-free floor plates span 27,000 to 30,000 sq ft.

Marina One’s typical floor plates range from 34,000 to 40,000 sq ft – among the largest available in Marina Bay.

There are two high density floors on the 28th and 29th floor of Marina One, measuring some 100,000 sq ft each and 170 metres long. Offering good views of the sea, each high density floor is able to accommodate more than 2,000 people.

This offering follows closely the popularity of “superwide” office spaces spanning 100,000 sq ft or more – the horizontal equivalent of the supertall high-rises – that have sprouted across Manhattan. These “superwide” office spaces are untested in this part of the world, with Marina One probably the only prime Grade-A office building in Asia to have high density floors.

But its success could stoke interest among other developers to provide such offerings in the future, said M+S CEO Kemmy Tan. So far, enquiries for such vast floor plates stem from global companies across sectors.

“These leasing activities are not just a flight to quality but a flight to efficiency,” Ms Tan said. “The larger floor plates allow companies to be more efficient in their space planning instead of straddling over several floors.”

In M+S’s last official update in June, signed leases and those under documentation exceeded 550,000 sq ft, out of Marina One’s total prime Grade-A office space of 1.88 million sq ft.

Ms Tan pointed out that recent leases inked for new developments are not just a case of companies playing musical chairs but a reflection of “green shoots” in the office market, with some companies “upsizing” their operations as opposed to others that are reportedly shrinking their office space and headcount.

Upsized, stylish and going niche: Co-working spaces bloom in Singapore

With its lavish interior designs and custom-made furnishings – including Italian hand-dyed rugs and handmade lamps sourced from New Zealand – The Great Room could be mistaken for the lobby of a brand new boutique hotel, instead of a co-working space.

And that is what the founders set out to achieve.

“This luxurious design concept came from observing how people like to meet in hotel lobbies. There’s a certain energy about hotel lobbies, almost like a sense of something purposeful or exciting is going to happen, and we want to replicate that,” chief executive officer Jaelle Ang, an ex-hotelier with training as an architect and artist, told Channel NewsAsia.

Officially launched two months ago, the 15,000-square-foot space, which overhauls the typical industrial chic image associated with most co-working spaces, is perhaps a reflection of how shared offices in Singapore have evolved since the sector’s first entrant Hackerspace.SG nearly seven years ago.

Then, the concept of having multiple companies or individuals sharing the same working environment was innovative and untested, but there are about 30 co-working spaces around the city-state now, with nearly one-fifth located in the Central Business District (CBD), according to figures released by property services and investment group JLL in July.

Experts say a host of supportive factors have facilitated the mushrooming of such facilities, including a thriving start-up scene in Singapore, as well as willingness from developers and landlords to partner co-working operators amid a softening commercial property market.

NEW ENTRANTS GOING NICHE

At The Great Room, which takes up the entire 10th level at One George Street, members can pick and choose their workspace from a variety of options including hot desks and private offices.

But eye-catching hardware isn’t the only factor that founders of The Great Room are banking on.

“Design can always be copied so we cannot rely on that. Our intent is to be a hospitality-inspired workspace,” said chief financial officer Yian Huang, adding that the team organises frequent business and social events such as its “Lunch & Learn” sessions which dish out advice on help available from government agencies, and curates its members to ensure a well-fitted community.

Three-week-old Collision 8 is the other new kid on the block, which boasts of having top-of-the-line workspaces alongside paranomic views of Boat Quay and Clarke Quay. On top of that, the 8,600-square-feet space, housed within High Street Centre, also runs on a “private member” concept.

“We have a set of questions to assess members based on their desire to innovate and collaborate,” said co-founder Michelle Yong, who is also the fourth-generation leader of homegrown construction firm Woh Hup. “We want to see if our members have the mindset of wanting to do something different, and preferably in collaboration with others.”

Inspired largely by her own partnership with co-founder Mr John Tan who is a serial entrepreneur and partner at two micro venture capital funds, Ms Yong wants to replicate an environment where “like-minded people” from varying backgrounds can come together.

“I started looking at this segment because the residential market has been pretty subdued and I was in search of new growth opportunities. I thought about targeting the healthcare professionals, given how crowded the co-working space is, but John suggested bringing together his investor community and my traditional corporate connections,” Ms Yong said. “So we believe in being an expert in one area while trying to find experts in other areas to piece together the best value chain.”

Meanwhile, Trehaus, which opened in February, is Singapore’s first shared office with child-minding facilities. The concept of the space, which houses workspaces such as hotdesks, dedicated desks, private offices and meeting rooms, as well as a children’s play area manned by trained facilitators, stemmed from co-founder Rachel Teo’s own frustrations from juggling the responsibilities of a working mother.

Thus far, the space has resonated well with parents, which account for 70 per cent of Trehaus’ members. During Channel NewsAsia’s last visit, the co-working area within the 3,800-square-feet space was more than half-filled while two childminders tended to three children at the play area.

“Certainly, we are not hipsters and neither do we have the cool vibes of Block 71 (the start-up space at Ayer Rajah Crescent), so we can’t and aren’t appealing to people looking for that. Our target group remains parents,” Ms Teo said. “We are also smaller but compared to other bigger spaces, we have a warm, homely feeling of a ‘modern village’.”

Industry experts say this growing trend of co-working spaces being centered on exclusivity and catering to niche groups comes on the back of an uptick in competition.

“These new operators can be considered as ‘start-ups’ themselves and unlike global co-working and serviced office brands such as WeWork and JustOffice, these new co-working spaces would have to carve out a niche and differentiate themselves in order to capture a certain market share from the major players,” said Cushman & Wakefield’s research director Christine Li.

Nonetheless, there are other players who believe in diversity. JustGroup’s founder and chief executive Kong Wan Sing, which owns two sprawling co-working spaces along Robinson Road and Raffles Quay, believes that meaningful collaboration hinges on numbers.

“I feel that collaboration will only be achieved when you have a big pool of members,” said Mr Kong, who added that members at JustCo hail from a wide range of industries such as public relations, fashion and hospitality. Apart from start-ups, bigger corporates including teams from Japanese messaging app LINE and American file-sharing site Dropbox also work out of JustCo’s shared offices.

“In fact, we are planning to become even bigger next year, with two new spaces spanning 100,000 square feet ready over the next six months,” added Mr Kong.

READY FOR FURTHER EXPANSION

And that optimism and willingness for further expansion, be it locally or overseas, is a common tune echoed by co-working space operators that Channel NewsAsia spoke to.

One reason is the lingering glut of office space in the CBD area, which has given co-working spaces more options to choose from and better negotiating power for leases with landlords, players said.

For Collision 8 which has plans for a café and additional space in the works, the co-working space still “has a long way to go before being saturated” despite rapid growth over the past years, Ms Yong said.

Ms Grace Sai, who spearheaded one of the city-state’s pioneer co-working spaces The Hub Singapore, agreed, noting that “cannibalisation within the industry” has not occurred just yet.

“It’s still early days to say (saturation). I think we will continue to take customers away from traditional office space, rather than from each other, so the cannibalisation within the industry isn’t happening yet,” said Ms Sai, who opened her second co-working facility at Cuppage Terrace earlier this month.

However, that is not to say that players, particularly the newer and smaller ones, will continue to enjoy an easy journey. “New entrants will either have to be more cost-competitive or more relevant to the target market they want to serve. Smaller players also will find it challenging because they may not enjoy the economies of scale in the market so there are a couple of us who are predicting a consolidation in the industry within the 18 to 24 months.”

Similarly for softening rents which have played well to the cards of co-working spaces, the gradual absorption of office supply may see rents recovering in the longer run, Cushman & Wakefield’s Ms Li said.

As such, some players like The Hub Singapore are rolling out future plans to offer more than just physical space.

“We have just closed our own venture fund to invest in great ideas and entrepreneurs out of our community. We have also signed memorandum of understanding (MOU) with 10 of the venture funds in the region like Golden Gate Ventures, so that they can have access to the deal flow from our community,” Ms Sai said.

WHO WINS?

As the segment continues to evolve, industry watchers say users of co-working spaces will be on the winning end as they benefit from the wider range of concepts and product offerings over time, said industry watchers.

For Ms Bibiana Neo who is working out of Trehaus at the moment, the family-friendly co-working space is a dream come true. “I wasn’t able to get any infant care or childcare services previously as the ones that I was looking for were all fully taken. If this didn’t come along, I would probably have to travel to an infant care that’s a distance away,” said Ms Neo, who is a business solutions account executive at local firm Xintesys.

“Now, as and when I finish work, I can walk over to the Atelier to feed (my daughter) or spend time with her. I think I’m really blessed that my employers allowed me to work out of the office.”

Businesses also have the option to pick and choose co-working spaces according to their needs.

For travel and social networking app Roammate, the availability of mentors under The Hub Singapore’s “coaching and mentoring” program was a key attraction.

“When we moved over to Singapore, we left behind all our networking connections so we opted for one of the memberships that gave us access to very frequent and accessible time with mentors across a lot of different types of industries, and it has proven to be a good place for us to start and build up our community again,” co-founder Hannah Ryan told Channel NewsAsia.

And it’s not just tech-related start-ups that have tapped into the benefits of co-working spaces. Public relations firm The Umami Collective, for instance, chose to work out of JustCo so as to have a business community at its door step.

Co-founder Suzy Goulding said: “When you are a small business, it’s good to have other entrepreneurial businesses around you to share ideas and collaborate on projects, and there’s always so many things to learn from so it’s always good to have a business community at your doorstep.”

Source : Channel NewsAsia – 24 Aug 2016