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Office Market Review

January 2020

Rentals have advanced in the last 12 months but the growth rate has slowed significantly.


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Singapore Office Market Update Jan 2020

Singapore
Office Market Update
January 2020
Published: 8th January 2020

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Demand for office space over the last 6 months has been muted / patchy with consolidation and right-sizing being prevalent in this cautious market. Forced relocations from Keppel Towers, Tower Fifteen and Shaw Towers (all due for redevelopment) have also had a big impact on supply in the economy sector. A shift towards 'out of town' locations has been noticeable and interest in the new schemes is picking up, particularly for 79 Robinson Road (redevelopment of CPF Building).

The confirmed re-development of established buildings like Keppel Towers had a double whammy effect in the market – it simultaneously reduced the number of office buildings in the CBD whilst displaced tenants absorbed the increasingly limited space in the secondary market. Online retailer Zalora is moving from Keppel Towers to take up 20,000 sq ft in 51 Bras Basah Road (fka Manulife Centre). Carousell is moving from Keppel Tower 2 to Rochester Park / Buona Vista (40,000 sq ft). The Concourse on Beach Road has been one of the main beneficiaries of such relocations, especially with shipping companies and new tenants here include V-Ships (Keppel Towers), GreatShip Global Offshore (Tower Fifteen) and Simmons SEA (Shaw Tower).

Out of town locations have been active. Engineering consultant, Worley Parsons has moved from Triple One Somerset to Alexandra Techno Park (35,000 sq ft) and Hikvision has also moved here from Shaw Towers. Chemical distribution company Brenntag Asia Pacific has leased 20,000 sq ft in Alice@Mediapolis, Future Electronics has moved to UE Biz Hub East (30,000 sq ft) and brand development company Edenred leased 10,000 sq ft in Tai Seng Centre.

Of the new developments coming up this year, 79 Robinson Road has attracted considerable interest. Anchor tenants already committed here are EFG Bank and Allianz (committing up to 50,000 sq ft each). Recent tenants to commit to this scheme include the International Monetary Fund (IMF) 10,000 sq ft (relocating from MAS Building) and Scottish drinks giant William Grant & Sons, leasing approximately 15,000 sq ft, relocating from Aperia in Lavender. Recently completed 18 Robinson, has attracted on-line photograph vendors Shutterstock, who took a whole floor and financial software firm IRESS taking half a floor.

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The tightening supply of office space is beginning to bite and the choice of options has become much more limited in the past 12 months. Indeed, those companies with a staff-strength of 40 to 90 people will find they may only have 10-12 buildings to pick from within the CBD, for any given budget. In some cases the choice may be even less, which is why it is critical to know well in advance what shadow space is coming available, ahead of the competition.

2020 will indeed be a challenging year to find the right office space. Inside the financial district, the widest choices can be found in 30 Raffles Place (fka Chevron House) 55 Market Street, Republic Plaza, Asia Square, Marina One and 51 Bras Basah Road. The most important new schemes coming on stream this year in the CBD will be 79 Robinson Road (Q2) and Afro Asia iMark (Q3), both on Robinson Road.

Outside / Edge of CBD, there is wide choice in Valley Point and ample space is coming available in PSA Building later in the year, when PSA Corporation move to their own new building in Pasir Panjang. There are further opportunities in the Harbourfront area and UE Biz Hub West. To the East, Paya Lebar Quarter still has quality space available.

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

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Rentals have advanced in the last 12 months but the growth rate has slowed significantly. Demand was not the factor for rental growth but the limited supply, so landlords could hold out for their target rates. However, demand is expected to continue to be weak for the next 12 months, with many businesses holding back on their expansion plans due to global economic uncertainties. We therefore don’t see much reason why rentals would advance much this year and may even soften marginally later in the year, with the next wave of supply set to hit the market in 2021/2022.

Top prime rates still average between $11.00 to $13.00 per sq ft effective. The mid-range buildings/locations command rates between $8.00 and $10.00 per sq ft and the economy range is in the region of $7.00 to $8.00 per sq ft effective.

To conclude we expect demand to remain weak in the medium term, rentals to be static over the next 12 months and supply to contract across the board. If asked whether this is a tenant’s market or a landlord’s market, it is still weighted in favour of the landlord but leasing activity will be slower over the next 12 months.

Click here to view Singapore office rental table.