CBD offices still available at $6-9 psf a month

Source : Business Times - 8 Jul 2008

Small pockets of space can be found in older buildings in the central district

THE average Grade A office monthly rental in Singapore touched $18.80 psf in Q2, while the vacancy rate for such premium space stands at a mere 0.6 per cent.

However, small pockets of space ranging from a few hundred square feet to 3,000 sq ft are still available in older buildings in the Central Business District. For example, at Cecil Street, Shenton Way and Tanjong Pagar, monthly rents range from $6 psf to $9 psf.

At International Plaza next to Tanjong Pagar MRT Station, a 400 sq ft unit without a window is going for a monthly rental of $6 psf, while a 1,500 sq ft unit on a higher floor has a $9 psf rental tag.

Over at Octagon along Cecil Street, two units (of 1,300 sq ft and 2,000 sq ft) are being offered at $7.80 psf.

At 146 Robinson Road, tenants are being sought for a few units of between 1,000 and 3,000 sq ft on various floors with an asking rental of $7.50 psf.

At Shenton House, asking rentals for units on the seventh and 25th floors are said to be in the $6.50 to $7.00 psf range.

‘While there are many office buildings asking for double-digit monthly rents, users can still find office units at single-digit rents on the fringe of Raffles Place, such as Robinson Road and Cecil Street.

‘These buildings are mainly older and have smaller floor plates. In addition, they are mostly sandwiched between other buildings and offer very limited or no car park lots in the building,’ says Knight Frank director, business space (office) Agnes Tay.

‘We would expect smaller companies providing professional services and non-financial companies to find such options attractive in terms of rental levels and at the same time without compromising on the convenience of location. These tenants could be in fields like auditing, accounting, consultancy, legal services, design, shipping and IT,’ she added.

Tenants willing to pay slightly higher rents but still shy of Grade A rates also have several options in the CBD.

At UIC Building on Shenton Way, owner United Industrial Corporation has put on hold its development plans for the property and is said to have for leasing a total 43,000 sq ft comprising units of various sizes from 700 sq ft to 9,000 sq ft.

The asking rental is said to be about $11 psf. UIC is said to be offering tenants leases of three years but without options for renewal.

In more prime buildings such as the Arcade near Raffles Place MRT Station and 8 Shenton Way (formerly Temasek Tower), asking rents are higher, around $10.50-14.50 psf and $12-14 psf respectively, BT understands.

Bigger office spaces in the CBD are also becoming available, partly due to the government’s initiative to move its agencies out of the CBD to ease the acute shortage of prime offices.

Singapore Land Authority will be giving up seven floors or 92,569 sq ft at 8 Shenton Way when it moves to Revenue House in Novena in Q4 this year.

InfoComm Development Authority is also expected to give up some space at Suntec City by the year-end.

Swiss banking group UBS is also believed to be giving up about 47,000 sq ft of space it no longer needs on the 10th and 15th floors of Suntec City Tower.

The space may be available for lease as early as September, BT understands.

A UBS spokeswoman said: ‘We are giving up some space at Suntec City because we’ve achieved more efficient space usage. But even after releasing this area, we’ll still continue to occupy some 200,000 sq ft at Suntec City alone. In addition, since last year we’ve leased 230,000 sq ft at One Raffles Quay. So we would still have grown our Singapore footprint from 250,000 sq ft in 2006 to 450,000 sq ft.’

Industry observers are keeping their eye on other big office occupiers to see if they, too, would release excess space.

DTZ noted last week that the government’s efforts to create more immediate office space - such as releasing transitional office sites and awarding disused state properties to the private sector for conversion to offices - has helped to ease the supply crunch and pressure on rentals.

This CBD office shortage will be eased from 2010 as new office projects are completed.

‘Going forward, as companies and government agencies start to move out of the CBD and more new supply comes onstream, office occupancy is likely to ease and limit rental growth in the CBD for the rest of 2008,’ DTZ said.