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Office Market Review

Q3 / Q4 2019

We expect rental rates to continue to firm across the board in all categories of buildings for the next two years.


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Singapore Office Market Reviw October 2019

Singapore
Office Market Review
Q3 / Q4 2019
Published: 1st October 2019

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Market Research Archive

The supply of new office space will be contracting over the next 1½ years with just two major schemes scheduled for completion over this period. Tenants will need to consider shadow space when assessing the alternative leasing options. Shadow space is space that hasn’t come to market yet but will be freed up as a result of major relocations of other larger space users.

Raffles Place is especially tight in terms of supply and finding larger units is particularly challenging in this location. Only when CapitaSpring is completed in March 2021 (635,000 sq ft) will the pressure be eased somewhat. Some relief may be found in buildings like Singapore Land Tower after Mitsubishi UFJ move to collocate to their HQ Marina One East Tower later in 2020.

6 Battery Road will also have some quality space coming available next year when Aramco relocate to OUE Bayfront and RHT Law Taylor Wessing give up 20,000 sq ft after their move to Paya Lebar Quarter. Income @ Raffles has four floors coming available when Regus return levels 20/F and 21/F and two other mid-rise floors are released following the acquisition of CA Associates by Broadcom. Republic Plaza has good choices at reasonable rates.

In the City Hall area EFG Bank is relocating from EFG Bank Building next year to 79 Robinson Road. This will free up the majority of space in their current building. The space released when UBS relocate their entire city offices to 9 Penang Road will free up significant space in One Raffles Quay North Tower. A total of 11 floors, amounting to a massive 229,000 sq ft will be coming onto the market in Q1 2021 and will be one of very few opportunities for large space users to secure prime Grade A office space before the next wave of supply in 2022. UBS will also be freeing up three large floors in Suntec Tower 5, each approximately 30,000 sq ft.

There are only two major schemes scheduled for completion next year in the CBD, namely 79 Robinson Road (514,000 sq ft) and Afro Asia i-Mark at 63 Robinson Road (182,000 sq ft) (See special feature on P6 and P7). The next wave of supply will come in 2022 with notably Central Boulevard Towers and Guoco Midtown coming on stream. Only one major scheme will be completed in 2021, that being CapitaSpring and 25% of that space has been preleased to JP Morgan Chase. Therefore the next 2 years will be challenging for those companies looking to upgrade to newer buildings and these may well command premium rates with such limited choice.

Currently the buildings that offer the widest choice of space include Odeon Towers, where Total Oil have just released 7 floors following their move to Frasers Tower, and One Marina Boulevard where Microsoft is releasing 5 floors following their move, also to Frasers Tower.

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Whilst the technology firms and co-working space operators have been the main drivers in terms of demand, other sectors have also been active. In fact the largest office leasing deal in the history of Singapore was closed earlier this year with UBS leasing the entire building at 9 Penang Road (redevelopment of Park Mall) and committed to lease some 383,000 sq ft of office space.

There are also some new players in the market such as e-cigarette firm Juul Singapore that secured two whole floors in One Raffles Quay North Tower (40,000 sq ft). The Tanjong Pagar area has been busy, some of the larger tenants from Keppel Towers have found new homes and Visioncrest Commercial on Orchard Road has been active. Outlined below is a brief summary of some of the larger recent movers.

For a summary table of recent relocations, view our latest Office Market Review

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We expect rental rates to continue to firm across the board in all categories of buildings for the next two years. This is not necessarily because of a surge in demand, but simply due to a lack of supply. Indeed demand from conventional office users is not that strong due to global economic uncertainties, but the flexible workspace operators have had a huge impact on supply.

So rents are advancing for not the healthiest of reasons and some businesses are beginning to baulk at paying the highest rental rates for over 10 years, since the last peak in 2008. Because of this, asking rates for some premium buildings have started to soften and we anticipate many companies will be more flexible in terms of location where better value for money can be found for quality space.

Established out of town locations will continue to attract more firms that don’t necessarily need to be in a 100% prime district, but options are becoming more limited. We predict that over the next 12 months that prime rates will advance 3%, rentals in the secondary market will increase by 6% and in the economy range will see growth of 8% because it is starting from a lower base. Average Top Grade A rentals will reach around $14.00 per sq ft by Q4 2020.

Click here to view a history of Singapore office rental rates.