GuocoLand, a Singapore-listed developer, yesterday launched the commercial and retail portions of its coming Tanjong Pagar Centre, saying it expects the Republic’s Grade A office leasing market to remain tight despite an expected onslaught of supply, as more companies move to the Central Business District (CBD) from the fringe areas.
About four million sq ft of supply will be added to the CBD from now till 2018 and, despite softer interest from traditional CBD office occupiers such as financial institutions, demand from technology, law and energy firms is gaining traction.
“If you look at the supply and demand situation, net absorption a year is about one million in the CBD. From 2015 till 2018, supply in the CBD will be roughly four million sq ft over these four years. In a broad stroke, that’s an equilibrium between supply and demand,” GuocoLand Singapore’s managing director Cheng Hsing Yao said yesterday.
“We have gone past the days when financial institutions were in a very aggressive mode of expansion. Having said that, it’s not (a situation where) there’s no activity among financial institutions … But beyond them, we’re also seeing tech (and) social-media firms coming to the CBD. They come to the CBD because talents want to be at a prestigious address, so it becomes important for companies to relocate to the CBD, not forgetting also that many companies are expanding,” he added.
Mr Cheng’s comments came after the Economic Development Board (EDB) forecast slower growth in Singapore’s fixed asset investments this year at S$9 billion to S$11 billion, after securing S$11.8 billion in 2014.
In a sign that demand for CBD offices remains strong, Mr Christopher Fossick, Singapore and South-east Asia managing director for property consultancy firm JLL, noted that other new developments there, such as South Beach and CapitaGreen, are “almost all taken up”.
“Net growth will come from the fact that supply is tight; occupancy is 94 per cent and there will not be any new buildings in the CBD from now until (Tanjong Pagar Centre) … If we continue on the historic average of about one million sq ft take-up every year, in a year, the 94 per cent (occupancy rate) will likely grow to about 97 per cent,” he said, adding that Grade A office rents would grow moderately in tandem from the current range of S$10.60 to S$12.90 per sq ft per month.
GuocoLand has started discussions with potential tenants for its 890,000 sqft office space and 100,000 sq ft retail component. The development will also consist of Clermont Singapore hotel, the 181-home Clermont Residence and a 150,000 sq ft urban park.