Office rents in Central Business District expected to rise in 2018


RobinsonTower
Rental rates for Central Business District (CBD) offices are expected to rise next year, which may push companies to reconsider relocating to regional commercial hubs.

While office rents are expected to ride a growth curve towards the end of 2017, a sustained recovery is expected to occur only in 2018. That however gives companies the value of time to weigh in on the possibility of moving outside of the CBD and into growing regional hubs where they could save on housing and commercial space rental.

Take the upcoming Paya Lebar Quarter for example. Its 840,000 sq ft of office space across 3 towers will be ready for occupation next year and on the other side of the island, Woods Square in Woodlands will offer up 534,000 sq ft of office space by 2019. While this means the companies will have to be situated away from the buzz of the CBD, the decentralisation of office spaces is timely as the government moves towards a new era of self-sustaining regional townships.

WOods SquarePhoto credit: Far East Organization

The limited supply, of less than 1 million sq ft, of additional office space in the prime Central Business District from now to 2020 could mean a projected rental growth. Though Frasers Tower and Robinson Tower will add a combined 823,000 sq ft of new office space to the CBD next year, it is still a long way below the 2.15 million sq ft injected by the Marina One and 5 Shenton Way developments this year.

Quiet on the Office front

5-shenton-wayIn preparation of this year’s imminent economic turmoil, businesses and companies are finding all ways to downsize, from retrenchments to cutting down on their office spaces or even uprooting to another country entirely. This may pose a spot of trouble for commercial real estate, especially in the more upmarket and expensive Central Business District (CBD).

This plus competition from the soon-to-be-completed Marina One and more available office spaces at the new Marina Bay Financial District such as Asia Square. The Tanjong Pagar and Shenton Way area are also seeing future competition from new office developments such as 5 Shenton Way, Robinson Towers and Frasers Tower. Some tenants have gone into subletting their spaces for lesser, subsidising rents for their sublet tenants so they get better deals than if they were to go to the landlords directly.

Robinsons Towers

Photo: Robinsons Towers (photo by taunsing.com)

But not all of the movement is out of the country. As Singapore remains one of the more established bases for multinational companies (MNCs), international firms may still continue to relocate their regional headquarters here. Hong Kong is the other popular base for MNCs, where housing rentals and costs of living  are comparable.

Technology, media and telecommunication companies  are however beating the odds and growing in numbers and size. Airbnb is now taking up 30,000 sq ft on Cecil Street, expanding from their original 13,000 sq ft. And Uber has also taken up 20,000 sq ft in Mapletree Anson.