The Ministry of Trade and Industry of Singapore (MTI) recently revised and narrowed the band of GDP growth of Singapore from ‘1% to 3% to ‘2% to 3%’ – a sign of better times to come in Singapore; at least in the third and final quarter of 2017.
The sectors that experienced growth on a year-on-year growth in the second quarter of 2017 include manufacturing, wholesale & retail, transportation & storage, finance & insurance, business service and other services industries. On the contrary, the construction sector and the information and communication sector experienced slight contractions – by 5.7 per cent and 1.8 per cent year-on-year respectively in the second quarter, continuing the decline from the previous quarter.
Leasing Activity Brisk for New Grade A Office Space
Leasing activity has been brisk for soon-to-be completed Grade A office buildings. Marina One has secured a pre-commitment for more than 70 per cent of its 1.88 million square feet of Grade A office space. The mixed used development, jointly developed by M+S (a joint venture between Temasek Holdings from Singapore and Khazanah Nasional from Malysia) is scheduled for completion in the later part of this year. Companies that have inked their leases include serviced office operator JustCo, Swiss Private Bank Julius Baer, British insurance company Prudential, Ocean Network Express, Macquerie Bank, PWC, Olam International, Facebook and Mitsubishi UFJ Financial Group, just to name a few.
Meanwhile, Guoco Tower, the office component of the iconic development above Tanjong Pagar MRT station was completed late last year has seen a steady rise in occupancy. It is now sitting at an occupancy rate of above 93 per cent and nearly a third of the tenants belong to the IT, media & communication sectors. Prominent tenants include the Accor Hotels Group (that is managing the hotel component of Tanjong Pagar Centre), global IT group Amadeus, UBER, ASICS, ING Bank, Norway’s DNB Bank and SAS Institute.
While take up rates for newly completed and soon to be completed Grade A office spaces within the Central Business District seem to be healthy, there is one clear observation – tenants are vacating their existing premises (older Grade A buildings) to move to these new developments. Flight to even better quality and efficiency of new and bigger floor plates were reasons suggested for the move. With financial institutions reducing their footprints in the Central Business District and shutting down unprofitable business units coupled with fewer MNCs setting up bases here in Singapore, it could be too early to call for the champagne bottle.
Older Grade A Office Space to be Backfilled
Some of the more prominent companies that have moved into these new schemes have cast ‘dark clouds’ over older Grade A and lower grade office buildings, leaving a great deal of space to be backfilled. Opportunities for prospective tenants to take advantage of premium office buildings located right in the heart of the Central Business District could be aplenty in the next 6 months.
HL bank which was occupying the retail space on the ground/first level of 20 Collyer Quay has moved to Tanjong Pagar Centre. Spanning a generous floor area of more than 7,000 sf, the ground floor unit has a double volume ceiling and has a wide frontage facing Collyer Quay and One Fullerton. It will work well for a business that requires a retail front with a prestigious business address in a very strategic part of Raffles Place; within a stone’s throw from Raffles Place MRT station. The lift lobby was also given a facelift recently and that has greatly spruced the look and feel of the office building.
Elsewhere, Republic Plaza 1 will see the departure of long term tenants with Mitsubishi UFJ Financial Group moving to Marina One at the end of the year and Itochu has moved to Guoco Tower. Full floor office spaces are available spanning 11,000 sf to over 14,000 sf with great views over the Marina Bay and Central Business District.
Buildings within Raffles Place that currently have full floor office space with great value include 8 Cross Street (the former PWC Building) and Prudential Tower along Cecil Street. A unique opportunity also exists for a business wanting an exclusive floor with a panoramic view of Singapore on a very high floor of Singapore Land Tower.
While the newest Grade A office spaces in the new Marina Bay area may be filling up with MNCs, businesses that could be scaling up and looking for better value leasing opportunities may have better luck with the older Grade A schemes in the core Central Business District. If the economy does show signs of improvement, we should expect to see a quicker take up rate in the older Grade A buildings now that rent for Grade A office space has bottomed out.
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