October 23, 2009
Leasing activity picks up in office projects
SP Services leases 100,000 sq ft at Mapletree Business City
By KALPANA RASHIWALA
THE flight to quality continues in the Singapore office market as occupiers move from older buildings to newer ones.
More than 90,000 sq ft has been leased to six tenants at 20 Anson, a swanky 20-storey office tower that received Temporary Occupation Permit (TOP) earlier this month. As a result, 45 per cent of the building's 204,000 sq ft net lettable area has been committed - up from zero just three months ago.
'Given current negotiations with three other parties, we expect to be 70 per cent committed in six weeks,' said Jones Lang LaSalle's head of markets, Singapore, Chris Archibold. JLL is the marketing agent for 20 Anson, representing its owner, FirstOffice Pte Ltd, which is linked to La Salle Investment Management.
The neighbouring Mapletree Anson is also said to have clinched a tenant recently for the top floor (19th floor) - Noble Group, which will occupy about 21,000 sq ft. It will be relocating from PSA Building.
Over in the Alexandra Road area, Mapletree Business City has secured its latest office tenant - SP Services, which has leased about 100,000 sq ft and will be moving out of its existing location at TripleOne Somerset (formerly known as Singapore Power Building).
MBC is expected to be completed around the middle of next year.
Meanwhile, Drew & Napier is said to be in discussions to lease 90,000 sq ft at 50 Collyer Quay (which is on the former Overseas Union House site). The law firm is currently at Ocean Towers.
'Leasing activity in the office market has picked up massively in the past three months. Unfortunately, however, what we're seeing is mostly a game of musical chairs being played as occupiers consolidate or relocate. There's not a lot of net take-up,' Mr Archibold said.
DTZ's head of occupational and development markets, SE Asia, Angela Tan notes that the stock of shadow office space - surplus space put up for subletting by tenants - has contracted.
'Occupiers are expanding, but they're still cautious. Often when they renew an existing lease or move into a new building, they lease for their immediate needs but negotiate for first rights to rent contiguous space - whether it's on the same floor or the floors immediately above or below - to cater for potential expansion.'
Market watchers note that tenants are riding on a flight to quality as they can lease space in brand-new buildings, which are more efficient and designed to maximise space usage, in places like Anson Road at rents below their passing rents in older buildings at Raffles Place.
Average rents of new buildings like 20 Anson and the neighbouring Mapletree Anson, which was completed a few months ago, are said to be about $6 psf a month. Some of the tenants moving into these buildings would previously be paying monthly rents ranging from $10-$15 psf in Raffles Place, notes Mr Archibold.
As for 20 Anson, the biggest of the six tenants signed up so far is said to be Computer Sciences Corporation, which has taken two floors or a total of about 25,000 sq ft.
BT understands other tenants secured include SAS Institute (around 16,000 sq ft), the airline Emirates (about 7,000 sq ft) and Australian Securities Exchange-listed BlueScope Steel, which has leased about 5,000 sq ft.
Colliers International is said to have represented SAS Institute, while Corporate Locations represented Emirates and BlueScope Steel.
BlueScope Steel will be relocating from Singapore Land Tower, Emirates from Parkview Square, and SAS Institute from 77 Robinson Road (formerly known as SIA Building).
JLL's Mr Archibold envisages a two-tier office market developing in about 12 months. 'Vacancy rates in some older buildings will be higher than in newer buildings as the flight to quality continues.'
While there has been much concern about supply in the Singapore office market, most of what is being built is Grade A space. Singapore does not have a massive amount of Grade A stock, which is what banks want, Mr Archibold argues.
As of Q3 2009, only nine million sq ft of Singapore's total office stock of 58 million sq ft was CBD Grade A space. Of this, only about four million sq ft is what JLL terms Grade A1 space, referring to premium office buildings with floor plates of at least 20,000 sq ft.
JLL forecasts that the Grade A1 office stock will increase to 10 million sq ft by end-2012 with the completion of new projects like Marina Bay Financial Centre, Ocean Financial Centre and 50 Collyer Quay. 'That's a good thing because at the end of the day, that's exactly the kind of space we'll need to offer to financial institutions if we're going to be a global financial centre,' Mr Archibold said.
Martin Koh/ Sherry Tang