OFFICE rents in Singapore’s Central Business District (CBD) likely peaked in the first quarter of this year, with further softening becoming more pronounced as more tenants opt for cheaper decentralised offices and financial institutions consolidate amid an uncertain economic outlook.
Key projects seen weighing down office rents in the Raffles Place and Marina Bay area in the second quarter were Asia Square in Marina Bay as well as CapitaGreen in Raffles Place.
According to some consultants, there was an aggressive marketing strategy to fill up Asia Square amid a potential divestment of Tower 1 by BlackRock Inc. The sale is said to have drawn bids from Norway’s sovereign wealth fund, CapitaLand and Keppel Land.
“As Asia Square Tower 1 is going through divestment exercise, it is in the landlord’s interest to fill up the building quickly,” said Cushman & Wakefield research director Christine Li.
In Marina Bay, Grade A effective direct rents – which are based on per floor basis and account for rent holidays and other incentives – slipped to S$11.01 per square foot per month (psf pm) in Q2, down from S$13.22 psf pm in Q1, Cushman & Wakefield estimated. In Raffles Place, rents dipped to S$10.66 psf pm in Q2 from S$10.92 psf pm in Q1.
Data released by the Urban Redevelopment Authority (URA) showed that office rents in the Central Region weakened by 2.6 per cent in the second quarter, after rising 0.6 per cent in the first quarter.
Ms Li is projecting a decline of 2 per cent in overall CBD prime office rents for each quarter in the second half, with the Marina Bay area more susceptible to rental fluctuations since some 58 per cent of the tenants there are banking tenants – of which many are reviewing their space requirements – compared with about 49 per cent in Raffles Place.
Savills head of research Alan Cheong said that he is expecting another 3-5 per cent slide in prime office rents in the CBD in the second half compared with the first half.
According to Colliers International, cost-conscious companies that do not require a CBD front office are making plans to move out of the financial district to reduce their occupancy costs.
Germany’s automotive firm Daimler Group, for instance, is moving from Centennial Tower in City Hall to about 55,000 sq ft at Westgate Tower in Jurong East with an estimated 30 per cent rental savings. Insurance company Great Eastern Life is also taking up close to 33,000 sq ft at Westgate Tower. Mechanical engineering services firm Beca has reportedly leased 26,000 sq ft at Westgate Tower, relocating from Anson Centre in Shenton Way.
Knight Frank head of consultancy and research Alice Tan noted that the current lack of demand from potential large-space tenants, adding that with the possible deterioration in market sentiment, “downside risks on Singapore’s rental growth could become more pronounced going forward”.
A report released by Knight Frank last week showed a 1.4 per cent drop in prime office rents in Raffles Place and Marina Bay based on 2,500 to 5,000 sq ft of net lettable area and flagged that Singapore’s prime office market is at a stage of accelerating decline in the rental cycle.
“As global and domestic business conditions turned cautious, leasing activities in Singapore’s office market are showing signs of weakening,” Ms Tan added. “Typical large space occupiers, in particular financial institutions, are holding back their expansion plans or are going through a consolidation phase by relocating to alternative locations or consolidating their offices to fewer locations in the CBD.”
Ms Li noted that a growing amount of shadow and secondary space is easing the supply crunch this year as some large bank tenants give up more space in Raffles Place and Marina Bay.
For tenants whose leases expire next year, they will be “spoilt for choice” as about four million sq ft of prime office space and 2.3 million sq ft of business park space (out of which 1.1 million sq ft comes from MapleTree Business City II) will be completed, Ms Li added.
That is the gist of a plan by owners of the historic Pearl Bank Apartments – and they have won tentative backing from the Urban Redevelopment Authority (URA).
The URA sees merit in conserving the horseshoe-shaped project in Outram, at 38 storeys the tallest residential building here when built in 1976.
It is also prepared to consider supporting some increase in gross floor area (GFA), in line with the management committee’s plan.
The owners want a conservation order for the building and propose that the GFA limit be lifted so a new residential block can be added. If they get the approvals, they then hope to entice a developer to rejuvenate the building.
The committee has called an extraordinary general meeting with owners tomorrow to seek consent from subsidiary proprietors.
A URA spokesman said that as the proposal affects the entire development and interests of subsidiary proprietors, all of them must be aware of the plan and agree. But she also said it “welcomes the ground-up initiative by the management committee to conserve Pearl Bank Apartments as there are merits for its conservation”.
“When the distinctive horseshoe-shaped building was completed in 1976, it was the tallest residential building in Singapore and had the highest density for residential development,” she told The Straits Times.
The conservation bid was set in motion last month, when owners representing about 45 per cent of overall share value voted to submit the application for voluntary conservation and redevelopment to the URA. More than 98 per cent were in favour.
The committee said in the letter to owners that it received a positive reply from the URA, as the authority is prepared to consider a maximum 15 per cent increase in GFA over and above the existing approved GFA of 55,102 sq m. This is subject to a cap of 430 units in all, including the 280-unit existing block, it said.
Under the plan, drawn up by the firm of Mr Tan Cheng Siong, who designed the original block, a 27-storey residential block may be built on the area now occupied by a five-storey carpark.
It will have a rooftop garden, a swimming pool and a bridge to the existing block’s 28th-floor common space. The owners will also ask the Singapore Land Authority to extend the 99-year lease.
The bid for conservation and redevelopment comes after three attempts at a collective sale from 2007 to 2011 – with no takers, owing to the high asking price.
The strata office sales market could be starting to run out of fizz – due to toppish prices and concerns about a future office oversupply and rising interest rates. The total debt servicing ratio also continues to clip appetites of mom and pop investors.
At the much-hyped GSH Plaza, sales have pretty much stagnated at 60-plus office units – around the level announced six weeks ago by the consortium that is doing a major revamp of the building.
Talk in the market is that the commission rate for agents to find buyers in the strata project has been doubled to 3 per cent by the owner in a bid to drum up sales.
A consortium led by GSH Corporation last year paid S$550 million for the 28-storey building, which was known as Equity Plaza at the time, and is undertaking an extensive refurbishment estimated to cost S$118 million (or S$400 per square foot based on the 295,000 sq ft gross saleable area).
When contacted on Thursday, a spokesman for the consortium, Plaza Ventures Pte Ltd, confirmed that there had been not much change in the sales status “because we are now focused on negotiating whole-floor sales”.
On average, there will be 10 strata office units per floor in the project. In all there will be 259 strata office units on Levels 3-28 of the building. Units range from 480-1,700 sq ft. Buyers have the option to buy entire floors (10,000 to 12,000 sq ft), thus enjoying additional discounts and floor space utilisation, according to promotional material on the development.
The spokesman declined to comment on market talk that some of the consortium members or their related parties/associates might have bought a chunk of the 60-plus units that have been sold.
Besides GSH, which controls 51 per cent of the consortium, Plaza Ventures’ other shareholders are TYJ Group, a private investment vehicle of GSH chairman Sam Goi (with a 14 per cent stake) and Vibrant DB2 (35 per cent stake). Vibrant DB2 is a 51:49 partnership between listed Vibrant Group and niche property developer DB2.
GSH Plaza’s attractions include its prime Raffles Place location and the bite-sized investment it offers individual investors with units as small as 480 sq ft, said observers.
So far, four caveats have been lodged based on URA Realis data. The units range from around 480 sq ft to 807 sq ft and are priced between S$1.57 million and S$2.49 million. The prices of the four units translate to S$3,009 psf to S$3,257 psf.
In early March, Plaza Ventures had said prices for the office units will range from S$2,850-3,500 psf, depending on the size of the unit and the floor it is on.
It is understood that most potential buyers found the average price of S$3,000-3,100 psf too demanding for a project with a balance lease term of only 73 years. “A price of S$2,700-2,800 psf would have been more reasonable,” said one party.
Moreover, the total debt servicing ratio framework continues to make it hard for individual investors to secure big loan quantums for property purchases.
Plaza Ventures is expected to retain the first two levels, which will have 21 retail units.
At Crown at Robinson – a brand new freehold strata office project coming up on the former Chow House site at 140 Robinson Road – sales are also said to have been slow. Prices of office units in the development range from S$3,348 psf to S$3,634 psf based on the seven caveats reflected in URA Realis so far.
As early as next month, SEB could begin strata sales at Anson House. The 13-storey building is on a site with a balance lease term of 81 years. Word on the street is that SEB is awaiting approval for strata subdivision from the authorities.
The strata units are expected to mirror existing tenancies with the minimum size exceeding 1,000 sq ft. Full-floor units will be 7,600-plus sq ft. Asking prices are S$2,900 psf and above.
The offices are located on Levels 5 to 13. Car park lots fill Levels 2, 3 and 4. On the first level are three retail units, which will also be made available for sale at prices exceeding S$4,000 psf.
In 2006, national water agency PUB started a progranne to turn Singapore’s drains, canals and reservoirs into recreational areas. PUB has completed 27 projects under its Active, Beautiful, Clean (ABC) Waters programme.
Audrey Tan highlights some of these projects.
Kolam Ayer ABC Waterfront
The first ABC Waters project officially opened in April 2008. It transformed a 250m stretch of Kallang River between Bendeemer Road and Kolam Ayer Pedestrian Bridge into a city oasis.
Kayaking and dragon boating are a regular feature along this stretch of water.
– Tiled pavements
– Floating Deck: An example of an interactive water feature that allows residents to get closer to the water.
One of the three latest ABC Waters projects officially opened by the PUB this year. The 1.1km stretch is the first official waterway improvement in the downtown area.
– Rain Gardens: They not only beautify the area but also act as a filter for rainwater run-off.
– Two pedestrian bridges improve the connectivity between neighbouring developments on both sides of the river.
Kallang River@ Bishan-Ang Mo Kio Park
Unveiled in 2012, this is the flagship project of the ABC Waters programme. Costing about $76 million, work on the 3km-long waterway was done in collaboration with the National Parks Board.
– A concrete canal was turned into a meandering river, complete with gentle slopes and plant-covered banks.
– The river is designed for both dry weather and storms. In dry weather, the river flow will be confined to a narrow stream. But during a storm, the water level rises without flooding the whole park due to the gentle slopes next to the river.
Majority of stakeholders in Boat Quay have given the green light to the plans to enhance the Outdoor Refreshment Areas (ORAs) along the promenade at Boat Quay. When completed next year, diners and visitors can look forward to an improved ambience and enhanced public realm.
Ground-up initiative to improve historic precinct
This project was initiated by Singapore River One (SRO) as part of their business plan to enhance the Singapore River precinct. SRO garnered support from stakeholders before putting forward a proposal to the Urban Redevelopment Authority (URA) to implement the project.
Mr Ng Lang, Chief Executive Officer, URA said, “The Singapore River is an important precinct that reflects our history. The Boat Quay area in particular, offers a unique riverside dining experience set amid our conserved shophouses. We are happy to partner Singapore River One to enhance the Boat Quay promenade and create open spaces along the promenade that will allow the public to enjoy views of the Singapore River. This project is a wonderful example of how the place managers of a precinct can take the lead to galvanise stakeholders’ support to improve their precinct. We hope more place managers will be inspired to do the same for their precincts.”
The URA appointed a consultant team last year to develop detailed proposals for the enhancement of the promenade and how the works could best be implemented. This included designing new ORA structures as well as creating three open spaces with new public seating and enhanced landscaping.
SRO, URA, and the consultant team engaged the stakeholders over a three month period from November 2014 to February 2015 to seek feedback and support from both the landlords and business operators on the proposed enhancements and construction timeline.
Mr Wilson Tan, Chairman of SRO said, “As part of our place management efforts for Singapore River, we want to improve the physical environment and capitalise on the strategic location of Boat Quay within the Central Business District. We believe the enhanced ORAs will offer a better visitor and dining experience. This initiative could only proceed with the input from the Boat Quay stakeholders and we are heartened that a majority of them have put their faith in us by expressing their support for this project.”
Improved public realm
Towards the end of 2016, the public can look forward to a refreshed riverfront promenade with new ORA structures. Three new open spaces will enable the public to enjoy views to and from the river and better appreciate the conservation shophouses along Boat Quay. The works will improve both the physical environment and fire safety as the existing overhanging wires across the promenade will be removed and located underground to serve the new ORA structures.
Artist’s impression of open spaces along the Boat Quay promenade
New ORAs designed in consultation with stakeholders
The new ORA structures are designed to take into consideration the stakeholders’ feedback and business needs. They will provide for a more open dining area during good weather for diners to appreciate views to the river and will include retractable canopies that can be lowered to provide protection from the rain. Slots have been designed for menu boards and signage, and beams provided from which to mount lights and fans. The timber-like floor decking was also specially chosen for easy maintenance.
Artist’s impression of new ORA structures with retractable canopies
Refer to Annex A for more information on the existing ORAs at Boat Quay.
The URA will be calling a tender in the second half of 2015 to appoint a contractor to undertake the works. The construction works is estimated to commence in phases from the first quarter of next year and will take around 10 months.
TO MINIMISE the impact on traffic, the new Jubilee Bridge was built from the river instead of the shore.
But building amid water presented serious challenges. Materials had to be ferried by ship and ingenious construction methods were used.
Built by the Urban Redevelopment Authority (URA), the 220m-long pedestrian bridge links the Esplanade promenade to Merlion Park.
It will be launched officially in November, but was opened last month to accommodate crowds during the funeral of the country’s founding Prime Minister Lee Kuan Yew.
That was “a quiet tribute” to the late Mr Lee, said the URA.
After all, the bridge was his brainchild. During a 2004 site visit to Marina Bay, he noticed that, to cross the river, pedestrians had to climb stairs up to the walkway along the Esplanade Bridge.
“Ask our engineers to think of a way to link up the two sides of the river at a lower and more pedestrian-friendly level,” he told planners at the time.
The $19.7 million bridge has no steps, providing barrier-free access. It is part of the 3.5km Marina Bay waterfront loop.
Boasting a width of 6m – three times that of the the walkway at the Esplanade Bridge – it can serve as another viewing platform. It can also help with crowd dispersal during events such as the New Year’s Eve fireworks display.
The bridge took a year to plan and 28 months to construct. Said URA executive civil and structural engineer Khong Zhi Cong: “Working on water has its own unique set of challenges.”
Metal fences known as cofferdams were used so workers could reach the dry river bed.
To avoid the hassle of putting up scaffolding in the water, the bridge was built without such support. Segments were added, one by one, on alternating sides of a central pillar, so the whole structure was kept balanced.
A member of the family behind Gudang Garam (Indonesian cigarette maker) bought a pair of adjoining shophouses along Pagoda Street at the busy entrance/exit of Chinatown MRT Station). The price of S$20m for the two adjoining 999-year shophouses translates to S$3,500 psf on built-up area and reflects just 1.8% gross yield based on current rental income.The land size is 2010 sqft with a 999-year leasehold tenure from 1875. The estimated build up area is 5700 sqft.
Homegrown boutique property outfit TG development is selling the properties.
The units, which are on the ground floor atrium of the 31-storey mixed development, are being sold as a single entity.
They span a total area of 5,081 sq ft and have column-free layouts with sizes ranging from 960 sq ft to 1,819 sq ft.
The units are at the mall’s main entrance and “enjoy high shopper traffic”, said DTZ Debenham Tie Leung (South-east Asia), the sole marketing agent.
It added that the indicative price for the four units in all is about $35.6 million, or $7,000 per sq ft on strata area.
Ground floor units in People’s Park Complex have traded from $4,522 to $11,011 per sq ft on strata area based on caveats lodged over the past two years.
Other tenants on the ground floor include travel agencies, mobile and electronics shops, health and wellness centres and tattoo parlours.
“Given the rarity of having a ground floor retail unit for sale in such a prime locale, we expect interest from both retailers who are keen to purchase the space for owner occupation and investors who are keen to purchase investment properties with steady returns in place,” said DTZ’s investment advisory services division.
People’s Park Complex, completed in 1970, comprises a 26-storey residential building on top of a five-storey commercial podium. It is one of Singapore’s first shopping malls.
The building, which is next to Chinatown MRT station, has a prominent 120m frontage along Eu Tong Sen Street in Chinatown.
The Singapore Tourism Board works with bodies such as the Chinatown Business Association to improve amenities in the precinct. Some recent initiatives include reopening the Chinatown Food Street and introducing free Wi-Fi coverage for certain streets.
The sale by expression of interest closes at 3pm on March 3.