(SINGAPORE) The Singapore office market is buzzing with leasing interest as banks and other occupiers expand their operations and plan moves to new Grade A office buildings.
Citigroup is widely tipped to be considering taking more than 200,000 sq ft at Asia Square Tower 1. The 43-storey block will have 1.26 million sq ft net lettable area (NLA) of offices when it is completed in June 2011.
At 50 Collyer Quay, Bank of America (BOA) is said to be in talks to lease about 120,000 sq ft. If a deal materialises, the leasing level in the building will cross the 50 per cent mark. 50 Collyer Quay, which will have 412,0000 sq ft NLA, is expected to be ready in Q1 next year.
Russian oil, gas and resource group Gazprom, which currently uses serviced offices in Singapore, is believed to be negotiating to rent one of the top few floors of the 43-storey Ocean Financial Centre (OFC), which will be completing next year.
OFC’s top few levels will have roof gardens.
Swiss bank Julius Baer, currently at One George Street and Harbourfront Tower 1, may also be considering taking space at a new location, possibly OFC, suggest sources.
In the Tanjong Pagar area, Goldman Sachs and Yahoo have each leased about 40,000 sq ft at Mapletree Anson, which was completed last year.
CB Richard Ellis is understood to be advising both anchor tenants that are expected to lease space at 50 Collyer Quay and Asia Square but its executive director (office services) Moray Armstrong declined to comment on specific clients the firm is representing.
Mr Armstrong was, however, willing to discuss the strength of the office leasing market in general terms.
When office demand began to pick up about a year ago, it was a game of musical chairs as occupiers cashed in on low office rents to move to new office developments.
‘However, deals in the past three months or so have been underpinned by positive headcount growth among occupiers in various sectors – including finance, insurance and professsional services,’ Mr Armstrong said.
Agreeing, Knight Frank director, business space (office) Robert MacDonald said: ‘We’re also seeing hedge funds, principally from New York, coming back to town. Law firms from the UK and US are also looking at Singapore.
‘Serviced offices are seeing very high occupancy thanks largely to new players entering Singapore. These companies will lay the foundation for office demand and help to backfill some of the space being vacated in older Grade A buildings when tenants move out to newer properties.’
On a positive note, Savills Singapore’s director (commercial) Agnes Tay points out that departures from older buildings create opportunities for remaining tenants to expand their premises within the same buildings.
Demand for office space in Singapore has recovered from a negative net take-up of about 236,000 sq ft last year to positive net demand of about 635,000 sq ft in first-half 2010. Standard Chartered Bank’s head of Asean property research Regina Lim forecasts positive demand of 1.9 million sq ft for full-year 2010. She predicts that the average monthly Grade A office rental value will end the year at about $10.20 per square foot, up 26 per cent from end-2009.
An office leasing agent says preleasing rents for Grade A buildings under construction have risen about 25-35 per cent year to date. ‘Monthly rents in new buildings are about $8.50 to $10 psf; they were $7-ish at end-2009.’
The islandwide office vacancy rate has fallen marginally from 12.5 per cent at end-Q1 2010 to 12.3 per cent at end-Q2.
DTZ executive director, business space, Cheng Siow Ying says a key challenge for office leasing agents is managing a mismatch of expectations as landlords have raised rent expectations in select buildings with high occupancies while tenants are still hoping to secure leases at competitive terms.
Citigroup, which is believed to be studying options including renting space at Asia Square Tower 1, currently operates at Millenia and Centennial towers (over 400,000 sq ft), Capital Square and Changi Business Park.
Leases on some space in Centennial Tower and Capital Square are understood to expire sometime next year. When asked if the bank was looking at new locations, its spokesman would say only that ‘from time to time, we may look for real estate options based on the expiry of leases’.
Chris Archibold, head of markets at Jones Lang LaSalle – the exclusive marketing agent representing Asia Square’s developer MGPA – said leasing interest in Tower 1 has accelerated in the past six months, with about 40 per cent of NLA under serious negotiation or let.
‘Tenant profiles are predominantly from banking and finance, professional services and consultancy practices,’ he added.
BOA, which is expected to vacate about 60,000 sq ft at Republic Plaza when its lease expires around mid-2011, is said to be considering a move to 50 Collyer Quay.
Source: Business Times, 19 Aug 2010