Many tenants argue that the market should be softening significantly, with the global economic uncertainties and now with COVID-19, expecting extra competitive deals should be possible. Whilst this is rational and understandable, the fact remains...
Demand has been sporadic over the last 6 months. Many locations have seen activity, with the exception of Orchard Road, where the only notable leasing transaction was the leasing of one whole floor at Haw Par Centre (21,500 sq ft) to Singapore Power, relocating from Keppel Towers 2. Take up has been boosted by the remaining tenants from Shaw Tower, Tower 15 and Keppel Towers all needing to find new homes. The main beneficiaries were buildings in the secondary market, which offer the most competitive rates, rather than the newer schemes.
One of the largest deals recently was the leasing of some 50,000 sq ft to video app company Byte Dance / TikTok in One Raffles Quay. Grant Thornton has relocated from Robinson Point to Asia Square Tower 1. On the edge of the CBD Nu Skin has leased 20,000 sq ft in UE Square, relocating from The Central. Outside the CBD, Roche Singapore has moved from Great World City to Paya Lebar Quarter.
79 Robinson Road, which is scheduled to receive TOP in May, has been the most active of the new developments and has recently secured Howden Insurance / RKH Speciality as a new tenant. Other recent tenants include IMF and drinks giant William Grant & Sons. Competing scheme, Afro Asia i-Mark has recently secured co-working space operator The Great Room as a new tenant, who has committed to lease some 37,000 sq ft.
Even schemes scheduled for completion next year, such as CapitaSpring, are now jockeying for tenants and Squarepoint Operation will relocate there from CapitaGreen next year.Click to download
Between 2020 and Q4 2022 approximately 5 Million sq ft of office space is expected to be completed. Averaged over 3 years this would work out to be approximately 1.66 Million sq ft per annum, which is not far off the historic 10 year average of 1.75 Million sq ft, but is still a shortfall of 100,000 per annum.
However, what is more concerning is that beyond 2022 there are no new developments to add supply of Grade A space in the core CBD market and we can already predict a spiking of rents in 4 years. Established buildings in the CBD which have the most space available will be 30 Raffles Place, 55 Market Street, One Raffles Quay, Asia Square Tower One and 78 Shenton Way.
Outside the CBD, buildings with the widest choice available include PSA Building on Alexandra Road, Valley Point on River Valley Road, Harbourfront Centre and Paya Lebar Quarter.Click to download
Many tenants argue that the market should be softening significantly, with the global economic uncertainties and now with COVID-19, expecting extra competitive deals should be possible. Whilst this is rational and understandable, the fact remains that supply is very tight and many landlords are sitting on buildings that are 95% full. So they have little reason to drop their rates, which would have a knock-on effect on lease renewals, when they have a building that is nearly full.
Tenants should look at buildings which have higher vacancy rates, such as new developments/refurbishments that need to fill out their buildings from scratch, as well as those buildings that have been hit by major relocations. Top prime rates still average around $11.00 to $13.00 per sq ft effective. Mid-range buildings remain unchanged since Q4 2019 at between $8.50 to $10.00 per sq ft, and the economy range is firming slightly to between $7.25 and $8.00 per sq ft.
The lack of supply will continue to support rental stability to a degree, but the global economic uncertainties and virus concerns will have a negative effect in the office leasing market. It is anticipated activity will be even more subdued and the prime sector could see an easing of rates by up to 2-4% over the next 12 months.Click to download
Our website can only show