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.

Strata offices available for sale in centre of town

Rarely do office spaces right in the middle of town come up for sale. Retail spaces possibly. Though mostly for rent. But 15 units on the 7th floor of TripleOne Somerset have just become available for sale in the premium Orchard Road area and response is expected to be keen.

111SomersetPhoto credit: 111Somerset.com.sg

Situated near the Somerset MRT station, the development consists of 2 towers of premium office spaces and a retail podium. It is currently undergoing a $120 million renovation to boost the development’s retail offerings, including future medical suites. Recently put up for sale at $41.56 million as an expression of interest, the indicative price for the 15,683 sq ft space stands at $2,650 psf. The floor on sale is also undergoing refurbishment and will be ready by May this year.

Property analysts are expecting investors to jump on this rare opportunity as properties such as these in a prime location are hard to come by. This could be the first time a space with such calibre in terms of potential is made available in the last 30 years. The space can be used as strata office units or medical suites. Most resale units with similar characteristics are in older, ageing buildings, and even then cost a fortune due to its scarcity.

111SomersetOfficePhoto credit: 111Somerset.com.sg

TripleOne Somerset is a 99-year leasehold building with its lease beginning from Feb 19, 1975, and it calls Gucci, Bottega Venetta, Samsonite and Bell & Ross as some of its many tenants. The rental potential of the space is also tremendous, with monthly office rents at around $8 to $8.50 psf and a gross rental yield of 4 per cent.