Many new office buildings pre-leased

A sense of strength is coming back into the property market this year, with the bottom of the cycle possibly closing in. And consumer interest, in both the residential and commercial fronts, are on the rise too.

FraserTOwersWith news of Facebook pre-leasing space at Marina One, the upcoming Frasers Tower in the heart of the Central Business District (CBD) has also received leasing proposals for 30 per cent of its 38-storey office building from various interest tenants. Most were from multi-national conglomerates, legal services, technology firms and a serviced-office provider, The Executive Centre who expressed interest in taking up an entire 20,000 sq ft floor space.

New office buildings are gradually filling up even before they are completed or ready for occupancy. There is however some movement from other existing buildings as tenants take the opportunity to relocate or upgrade, as seen in the mix of tenancy in Marina One and Guoco Tower. Frasers Tower has a 663,000 sq ft of total net leasable area. More new office spaces are currently being developed in the CBD, including UIC Building and the new property which will sit on the site of the previous CPF building. Though office rents have been falling, it may be a good sign after all as the market would have picked up by the time these new buildings are

Office leasing market recovery expected in 2018

AXATowerWith predictions of prime office rents recovering in 2018, could this be the year to invest in commercial properties, in particular Grade A office spaces?

Despite fewer commercial spaces being released and slight holdbacks from tenants in the leasing market – office rents have fallen 20 per cent since 2015 – property analysts are still hopeful for a 3 per cent overall rental growth in prime Grade A office space, mostly in the Central Business District (CBD). The rebound in rental prices is expected to happen in the later half of 2018, with stabilisation possibly occurring even earlier.

At the moment, average monthly rents of an office space in Marina Bay hovers around $9.05 psf, followed by $8.72 psf in Raffles Place, $8.42 psf at City Hall and $7.86 psf in ShentonWay and Tanjong Pagar. The weakening oil and gas sector has put pressure on businesses and affected market sentiments all round.

SouthBeach3
Photo credit: www.southbeach-sb.com

But with announcements of multi-national companies such as Facebook moving into the Marina Bay area and upcoming city fringe developments such as South Beach giving more traditional office districts a run for their money, 2017 could be the time to pick off potential units which may be affordable options when rents do rise come next year. The next wave of new office spaces which will enter the market is projected for 2020 and 2021.

 

Long-term potential of Commercial property in Singapore

Commercial properties in Singapore still hold a special place in the hearts of investors, if the activity in the market last year was anything to go by.

straitstradingbuildingThere were some massive bulk purchases of prime sites from foreign entities in 2016 and developers were actively buying up land sites. Investors are obviously seeing huge potentials of the commercial property market here. The 43-storey Asia Square Tower 1 for example was sold at $3.38 billion to Qatar Investment Authority’s sovereign fund in June 2016. This record sale by investment firm BlackRock was the largest single-asset and office transaction in the Asia-Pacific region. On a smaller but not any less worthy scale, is the sale of the Straits Trading Building to Indonesia’s Mayapada Group for $560 million. At $3,250 psf, it set a record for psf prices in the district.

Investors from all over the world are spotting the potential for long-term positive growth in this region and in extending their reach in Singapore. Large assets here are of particular interest and 2017 may see more such transactions taking place.

sbf-centerNot only are they investing in completed commercial properties, but also in land with developmental potential, such as a white site in Central Boulevard which was purchased by Malaysian plantation and real estate tycoon, Lee Shin Cheng. This Marina Bay mixed-use site was released under the Government Land Sales (GLS) programme. Though the office rental market has not been in its best form last year, there is hope that it will bounce back up by 2021.

 

Office supply on the rise

As the supply of office spaces, especially in the Central Business District, increases, landlords are lowering office rents to entice new tenants. For the 3rd quarter in a row, CBD office rental prices have fallen.

Eon SHentonProperty analysts are expecting a rise in supply as companies move out of the prime central business district into cheaper regional business hubs and expansion plans for many foreign entities may have been put on hold due to the wavering global economy. Grade A offices were resilient despite the overall fall, perhaps due to the lack of supply of new units in the core areas. But moving outwards from the centre of the CBD, Grade B office spaces in Shenton Way, Robinson Road, Cecil Street, Anson road and Tanjong Pagar fell 4 per cent.

Co-working spaces have gained popularity of late, and demand for these sort of short-term leasing or shared-leasing arrangements may be on the rise. Most of these tenants are start-up firms in the technology and social media fields who need spaces close to their clients and conveniently located to attract and retain talents.

In addition to the off-kilter scale of supply and demand, some tenants may also be looking at subletting existing spaces which they have leased but are not occupying, thus increasing the actual amount of office space available in the market.

Soho – Home, office or both?

When you see a new property advertised as a Soho, what are you expecting to get? The term Soho is commonly used to refer to Small Office, Home Office. So are they residential or commercial property? Developers have been marketing both homes and commercial units under the label “Soho” and have drawn some flak as a tactic to boost sales.

The Siena at Pasir Panjang.

The Siena at Pasir Panjang.

However the Urban Redevelopment Authority (URA) has responded to say that “Soho” is a marketing term and does not necessarily describe the type of property sold. Soho units have sold particularly well as buyers are drawn by the flexibility in the use of space in these premium properties. Far East Organization, for example, sells their Soho brand properties with a ceiling height of 3.35 to 4.8m and some can even choose to have their units come with a 5 sq m loft platform. Buyers have the option of using part of their home as an office but could also keep it entirely as a live-in area.

The upcoming The Siena in Pasir Panjang is one such Soho property. A 99-year leasehold project developed by Far East Organization under their specialized Far East Soho brand, units will range between 538 and 980 sq ft. Other Soho units available in the market include those at The Cape, 16 @ Amber and The Hillier, just to name a few. Some commercial developments also have Soho units for sale, including PS100 at Peck Seah Street in Tanjong Pagar and the new mixed-use development, Southbank at North Bridge Road, managed by the Hong Kong-listed property developer Xpress Group.

 

PS100 at Peck Seah Street in Tanjong Pagar.

PS100 at Peck Seah Street in Tanjong Pagar.

Soho buyers are often willing to pay for the luxurious space and design features which they come with. A 2- bedder Soho at The Cape costs around 1,900 psf, one at 16 @ Amber range from $1, 599 to $1, 687 psf. And at the 528-unit 99-year leasehold The Hillier, a Soho unit is priced at approximately $1, 400 psf. Commercial Soho units are much more expensive. At PS100, an office unit could cost you $3, 000 psf.

As new projects come up, more property types and options are made available (e.g Soho units, dual-key apartments). What would you consider paying for or sacrificing when you are property hunting and does it always boil down to price?