ERA Daily Research - 29 April

Office rents could bottom out by end-2021 amid uneven property segment recovery: report

The Business Times, 29 Apr 2021, Thu  

By S Priyashini

OFFICE rents in Singapore could bottom out by the end of this year, on expectations of recovery in the office sector, said a latest report by Edmund Tie on Wednesday.

With Singapore being an attractive base in the region for Western and, increasingly, Chinese companies, employment outlook could improve gradually, said the real-estate consulting firm. Office expansion plans by Tencent, Alibaba and ByteDance will support this growth, as these companies seek to recruit more talents in Singapore.

In a report dissecting the property segment in Singapore, the real-estate consulting firm highlighted that rents of premium-grade offices held up well in Q1 2021, as corporates in sectors such as technology, fintech and finance "embarked on a flight to quality".

Additionally, there was some leasing demand from tenants of AXA Tower and FujiXerox Towers, the impending redevelopment of which has sent these occupants on the hunt for alternative office space, the report said. The monthly rents in the different subzones of the office sector thus held steady or declined slightly.

Research statistics showed that the island-wide occupancy rate for office space remained stabilised at 93.3 per cent in Q1 2021. Occupancy rates in the central business district (CBD) fell by 0.4 percentage points quarter on quarter to 92.7 per cent in Q1 2021, from 93.1 per cent in Q4 2020.

Rentals of office space in Singapore's central region turned a corner in the first quarter of 2021, as rents rose 3.3 per cent quarter on quarter, versus a 3.5 per cent contraction in the fourth quarter of last year.

The latest report added that recovery in the top segment of office space was also spurred by the Phase 3 reopening of the economy last December, following the Covid-19 outbreak; this came in addition to recent government announcements this month that work-from-home is no longer the default arrangement.

However, the firm's senior director of research and consulting Lam Chern Woon cautioned that the relatively energetic uptake in the premium office sector was due to the convergence of localised factors, not necessarily reflecting broader economic fundamentals.

For instance, major banks are reviewing their operations and trimming their physical offices as they rethink the hybrid working model. DBS reportedly plans to shed 75,000 square feet of its office space at Marina Bay Financial Tower (MBFC) Three; co-working operator Just-Co, which announced last month that it was opening another office in Tampines said that businesses continue to remain cautious about expanding traditional office spaces.

"Overall demand is still soft, as net absorption island-wide declined from 390,000 square feet (sq ft) in Q4 2020 to 74,000 sq ft in Q1 2021," said Mr Lam.

Thus, there remain uncertainties surrounding the office segment this year due to factors such as the working-from-home model and the strength of recovery in this segment.

"The jury is still out on the ideal hybrid-working model, and we are likely to see a fair degree of variations in the office-home split arrangements across industries and job functions," Mr Lam noted.

On a broader level, there is uneven recovery in the property segment in Singapore as investment and residential sales improved their performance, said the report.

On investment sales, private investors were active in Q1 2021, accounting for S$4.8 billion in transactions, even in the absence of government land sales. This strong performance was driven by residential and office sectors, which posted total transaction amounts of S$1.8 billion and S$1.6 billion respectively, said the report.

As for residential segment performance, the firm underscored a 16.9 per cent increase in total private home sales volume in Q1 2021, hitting 8,100 units from the 6,929 units sold in Q4 2020.

The firm attributes this surge in sale of residential units to "timely government interventions during the worst of the pandemic last year", which kept many businesses and jobs intact. This was supportive of the demand for homes, said Edmund Tie.

"With the mainstream economic recovery now underway and the expectation of more launches ahead, we expect residential demand and prices to improve for the rest of the year," noted Mr Lam.


Large unit at Queensway Shopping Centre put on market for S$7.5m

The Business Times, 29 Apr 2021, Thu  

By Fiona Lam

A UNIT occupied by Anytime Fitness and spanning 2,734 square feet (sq ft) at Queensway Shopping Centre has been launched for sale via private treaty, with a S$7.5 million guide price.

This comes about two years after the freehold development failed in a collective-sale attempt as it did not obtain the required 80 per cent owners' consent.

The latest offering, located on the third storey, is one of only two large floor-plate units in the mall with 24-hour access and a wide glass-facade frontage, said marketing agent Huttons Asia. The other similar unit has been tenanted to fast-food giant McDonald's for more than 20 years.

Anytime Fitness has been operating there for six years; the 24-hour gym recently renewed the lease for another three years till May 2024.

The retail and food and beverage (F&B) unit provides the owner with a stable recurring income from an established long-term tenant, and has the potential for capital appreciation, said Huttons associate senior district director Quek Fu Jin, who is marketing the space for sale.Bottom of Form

To increase the rental yield, the unit can potentially be subdivided into up to seven smaller ones, which may create a unique F&B mix, Huttons noted in a press statement on Wednesday. It added that full F&B infrastructure, such as water, electricity, gas and grease traps, has been provided.

Given the 24-hour access, the space could thus be suitable for F&B outlets with long operating hours, such as hot-pot restaurants, Huttons said.

According to Mr Quek, the unit has a "highly visible retail frontage ideal for direct media advertisements". It is also located directly above the high-traffic McDonald's outlet.

The guide price of S$7.5 million translates to about S$2,743 per square foot (psf), which Mr Quek said is an "attractive" price tag for a freehold commercial unit. A less prominent unit on the same level had changed hands for S$2,740 psf in March 2020, he added.

Unit owners at Queensway Shopping Centre and its adjoining residential block, Queensway Tower, earlier tried to put the properties up for sale en bloc, but the bid fell through in November 2019 when more than 20 per cent of owners by share value opposed the proposal.

The two properties housed a total of 241 retail units and 78 residential apartments, and most of the owners that were against the en-bloc sale were shop owners, Today reported at the time.

Situated in the city fringe, the shopping centre is known for its affordable sporting apparel outlets. It is a 16-minute walk from Queenstown MRT station, and a four-minute walk from Ikea Alexandra.


High-floor strata office at Suntec Tower 2 up for sale

The Business Times, 29 Apr 2021, Thu  

By Lisa Kriwangko

A STRATA office at Suntec Tower 2 has been put up for sale via expression of interest, with an indicative price of S$37.5 million, the sole marketing agent CBRE announced on Wednesday.

Located above the 30th storey of a Grade-A tower, the high-floor office includes an exclusive lift lobby and a panoramic view of its surrounding cityscape, said CBRE.

It has a strata area of 12,281 sq ft, which amounts to about S$3,050 per square feet. The entire office floor is currently fully leased.

Clemence Lee, senior director of capital markets at CBRE, said: "We expect strong interest from investors such as boutique real-estate funds, family offices and high-net-worth individuals. As the lease is expiring by end of the year, the office floor will be also suitable for owner-occupiers seeking immediate occupation in Suntec Towers."

Both locals and foreigners are eligible to purchase the property, which is zoned "commercial" under the Urban Redevelopment Authority's 2019 Master Plan.

The expression of interest closes at 3pm on June 3.


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