The musical chair in CBD offices

By Feily Sofian / The Edge Property | July 24, 2015 12:24 PM SGT
Rents of office space dipped 2.6% in 2Q2015, reversing the 0.6% increase seen in 1Q2015, according to the latest data by the URA. Landlords are anxious to fill up their space before a tidal wave of 5.9 million sq ft of office space (gross) hits the market next year.
It did not help that the seemingly active leasing in the CBD was partly due to a musical chair rather than expansion. For example, Marubeni vacated its Hong Leong Building office for newly completed CapitaGreen. Rakuten is similarly heading for CapitaGreen from its current address at One George Street. Designed by world-acclaimed Toyo Ito, the 40-storey CapitaGreen features column-free typical floor plate of 22,000 sq ft and a natural facade of trees and living greenery.
Talk in the market is that the Royal Bank of Scotland is putting up some of its space in One George Street and One Raffles Quay for lease. Recruitment firm Hudson said the hiring sentiment in 2H2015 is shrouded with caution. Of all sectors, the banking and finance industry has shown the strongest decline in hiring intentions, its latest report says.
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Alan Cheong, head of research at Savills Singapore, says "Although tenants are moving from older buildings to newer ones and increasing their net space taken up, it would not be enough to counter the new supply, secondary and shadow space that enters the market in the coming two years."
Flight-to-value outshines flight-to-quality, according to Cushman & Wakefield. In 2Q2015, BBC Asia Bureau vacated its Shaw Tower office for a 10,000 sq ft space in Aperia, a high-tech industrial park in Kallang. Separately, Dimension Data let go of its Suntec Tower 4 office and found a new home in Aperia spanning 55,000 sq ft.
The median rent for Category 1 office space fell 2.8% quarter-on-quarter to $10.32 psf per month in 2Q2015. The URA defines Category 1 offices as modern or recently refurbished projects in Downtown Core and Orchard with quality specs such as a large floor plate.
Landlords have become increasingly aggressive in their marketing efforts. Some landlords are offering financial helps to potential tenants to ease their relocation and renovation costs as well as dishing out higher commissions to agents. Top-grade projects such as DUO Tower, Guoco Tower, Marina One and V On Shenton account for the bulk of upcoming office supply in 2016.
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CapitaGreen features column-free typical floor plate of 22,000 sq ft.