(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

Some tenants factor in higher headcount as they move to new locations

(SINGAPORE) There’s a buzz in the office leasing market. Many new leasings are at the expense of space being given up in existing locations as occupiers are drawn to better-value propositions in newer buildings. But a few are taking up more space in their new locations than what they are giving up in their existing premises to cater to future increases in headcount.

‘It’s not all musical chairs. There’s also a smattering of improved headcount numbers, even as most occupiers chase lower cost, better value locations,’ a seasoned office property consultant said.

Another office consultant, Knight Frank director of office leasing Agnes Tay, said: ‘I don’t expect net office demand to turn positive this quarter, but the negative demand will be smaller in the second half of this year. Companies in general are more optimistic now compared to the end of last year.
More of them are now taking a position on headcount and real estate requirements and a few are even making plans for future growth.’

Much of the leasing activity has centred on new buildings – including Mapletree Anson and Straits Trading Building.

More than 80 per cent of Straits Trading Building is said to be let out, ahead of its completion later this year.

Tenants are said to include Rajah & Tann (which is understood to be taking up at least 80,000-90,000 sq ft), overseas law firm Conyers Dill & Pearman and serviced office operator Asia-Pacific Business Centre. Colliers International is said to have brokered these leasing deals.

Rajah & Tann is expected to move from its existing premises at Bank of China Building nearby; Conyers, which is leasing a floor at Straits Trading Building, will move from Singapore Land Tower.
Over in the Anson Road/Tanjong Pagar corner of the CBD, Mapletree Anson, which received Temporary Occupation Permit recently, is said to be 35 per cent let out, with more than 100,000 sq ft leased. Tenants include AON, QBE (both involved in the insurance and reinsurance business) and a Japanese MNC, understood to be Sumitomo.

AON is moving from Singapore Land Tower, QBE from OCBC Centre and Sumitomo from Equity Plaza. CB Richard Ellis is said to have brokered the three leasing deals in the project.

Tenants are said to have been drawn to Mapletree Anson’s efficient floor plates, with column-free space of 20,000 sq ft per floor allowing more effective layout of workstations.

A stone’s throw away, a La Salle Investment Management fund will be completing its 20 Anson Road project in a few months.

Both office buildings have attained Singapore’s highest green building certification of Green Mark Platinum.

An office developer said: ‘Most of the leasing deals in the past six to nine months involve relocations or consolidation from several buildings into a single location. In contrast, 12 to 24 months ago, leasing deals involved occupiers upsizing their space requirements.’

Jones Lang LaSalle’s head of markets, Singapore, Chris Archibold said: ’2009 will be a negative take-up year but in terms of market activity, leasing deals will be higher in the second half of this year. A lot of relocation is being driven by consolidation or downsizing rather than expansion. Hopefully, expansion will come back next year. There are tenants with passing rents below current market rents and who are therefore looking for cheaper alternatives like new buildings in peripheral CBD locations.’

Office consultants expect office rents to continue easing for the rest of this year – but at a slower pace. The demand is still weak but there is substantial supply coming on the market in the next few years.

According to government figures, the pipeline supply for the office sector stood at about 13.3 million sq ft gross floor area as at end-Q2 2009, of which about 12 million sq ft is slated for completion by 2012.

JLL’s average monthly rental value for prime Grade A Raffles Place (small space) stood at $9.50 psf in Q2 2009, about half the peak figure of $18.40 psf in Q3 last year.

Source: Business Times, 5 Aug 2009