Fears are emerging of a possible office space crunch despite the soaring skyscrapers framing the ever-changing central business district (CBD) skyline.
No commercial sites were on the confirmed list of the Government Land Sales (GLS) programme for the first half of 2015 released last week. These sites go on sale regardless of interest.
This has fuelled concerns in some quarters that despite a slew of new commercial buildings slated for completion in the next three years, space could still be in short supply down the line.
Industry players say the new buildings should meet demand for office space in the Downtown Core – which covers the CBD, City Hall, Bugis and Marina Centre areas – in the short term.
But some fear a possible crunch, amid an increasingly diversified profile of tenants looking to set up shop in the core business district.
The Straits Times understands that developers are keen to see more commercial sites go on sale.
The GLS programme for the first half-year has only a 0.78ha plot in Marina View and Union Street and a 2.1ha commercial site on the reserve list – requiring bidders to first submit an acceptable opening offer to trigger a tender.
The two sites could yield 1.89 million sq ft of commercial space.
“As office developments tend to be large, we do not always need to supply an office site on the confirmed list every half-yearly,” the Urban Redevelopment Authority (URA) said in response to queries from The Straits Times.
“New office supply from the GLS programme is intended to meet demand in the medium term, after factoring in a construction period of about five years.
“Our supply of office space in the Downtown Core will also need to be balanced against our efforts to build up new commercial centres outside the city centre to bring jobs closer to homes.”
About two-thirds of 11.8 million sq ft of commercial space are in the central areas, which will be enough to meet demand “in the next few years”, said URA.
But experts believe supply will be patchy up to 2018. Beyond that, the lack of new supply is “becoming starkly obvious”.
CapitaCommercial Trust’s 702,000 sq ft CapitaGreen will be completed by the end of the year. The 500,000 sq ft office component of the South Beach integrated project is set to be ready too.
After a dearth of fresh supply next year, about 3.2 million sq ft of office space – the size of Marina Bay Financial Centre – from four projects is expected to flood the market in 2016: M+S’ DUO in Beach Road and Marina One in Marina Bay, GuocoLand’s Guoco Tower in Tanjong Pagar and UOL Group’s 5 Shenton Way.
The supply will be trimmed yet again in 2017, with just 805,100 sq ft coming on stream from Frasers Centrepoint’s commercial site in Cecil Street and Tuan Sing’s redevelopment of Robinson Towers.
“Historically, it’s always been a feast or famine in Singapore’s office space if you look at the supply chart. Landlords and occupiers will have to time their renewals and leasing plans according to that,” noted Mr Desmond Sim, research head at CBRE, Singapore and Asia Pacific.
The result is that rents of Grade A space – in top-quality buildings – could pick up at a faster clip in 2018, said Mr Sim.
Already, monthly rents have picked up 17 per cent, from $9.66 per sq ft (psf) since the trough in the third quarter of last year, to $11.20 psf now.
However, Ms Tan Li Kim, head of research at Cushman and Wakefield, estimated demand for office space would be 4.4 million sq ft by 2018, against the 5.3 million sq ft of space that could be available by then, if the upcoming projects are developed on time.
This supply would be from different office micro markets within, so any rental fluctuations are expected to even out, she said.
One micro market that has stood out would be the offices in the Marina Bay precinct, for instance, said Mr Moray Armstrong, executive director of office services at CBRE.
The URA has made plans for 10.8 million sq ft of new office space under its Master Plan 2014.
But, as Mr Armstrong put it: “The million sq ft question is where and when the next landmark Marina Bay development will arise.”