Office and retail rental market: The competition between old and new

GSH PLazaIn the commercial property market, the effects of demand and supply is more strongly felt that ever as many new developments enter the market in line with the government’s efforts to grow and restructure the country’s commercial sector.

The positive outlook and sentiments in the private property market here does not seem to have rubbed off in the commercial sector as office rents fell 3.4 per cent in Q1 and retail rents fell 2.9 per cent – its 9th consecutive quarter of price declines. Prices of office spaces also fell 4 per cent in the first quarter of the year, following the 0.6 per cent fall from last year’s Q4. The numbers do not reflect the 2.5 per cent expansion of Singapore’s economy in the first quarter of the year, largely boosted by manufacturing and other trade-dependent sectors.

MarinaOneOfficeOther than Marina One which found tenants quickly, landlords of older commercial establishments are finding it increasingly difficult to compete with the newer offerings and have found themselves having to drop their prices in order to source for more tenants, even as more companies are relocating into cheaper and newer buildings outside of the core central region. Some companies are also exploring co-working options, which decreases the demand for commercial real estate on a permanent basis. New commercial buildings such as GSH Plaza and Guoco Tower will also increase the supply of prime office spaces in the Central Business District (CBD) and as these landlords are already raising their asking rents for Grade A office spaces, property analysts are expecting the country’s economic growth to fuel the commercial property market as the year moves on.

Heritage property in Orchard Road up for bids

Rising retail rents and popularity of e-commerce has had the old dame of Singapore retail, Orchard road, in need of a facelift. The recent month-long Fiesta on a Great Street hoped to draw shoppers back into the area with pop-up events, shopping promotions and lucky draws.

SLAOrchardRoadPropertyPhoto credit: State Land Authority

But what about keeping some heritage of the area, giving it a touch of tradition and history amidst the modern retail street. A heritage state property spanning 5 adjoining addresses on Orchard road has come up for sale. Situated near MacDonald House, the history of these properties herald from the post World War I era, with classical and art deco architectural features. It is the last remaining street-block of buildings in Orchard road.

Managed by the State Land Authority (SLA), the 5 units are now being offered up for a 3-year tenancy. And unlike previous government bids which were based purely on price, SLA has said that they will also consider the quality of the bid, which means the tender may not necessarily go the lowest bidder. 50% of the consideration will be dependant on the bid price and 50% to the concept.

SLAOrchardRoadProperty1Photo credit: State Land Authority

Though an attractive offer, property analysts do not expect it to be an easy-going tenancy as the property is placed at the end of the Orchard road stretch. The concentration of tourists and expatriates in the area however could be a jumping off point for the conceptualisation of a proposed plan for the property. The conservation status of the property also means some restrictions will apply and it will take a tenant with experience and adaptability to make it work. Market rental rates for the properties are currently around $3 to $4 psf.