Hongkong Land Holdings, a developer of Singapore’s biggest office project, expects commercial rents to rise in 2010 as the Southeast Asian city- state emerges from recession.
Hongkong Land is one of three owners of the 3 million square-foot Marina Bay Financial Centre, a five-tower complex overlooking the central business district that opens from next year and will be completed in 2012.
Commercial rents in the central area slumped 23.8% in the second quarter from a year earlier as Singapore endured its worst recession. The market is “bottoming out” and rents will start increasing in the middle of next year, said Robert Garman, Singapore’s executive director of Hongkong Land.
“Sentiment has improved somewhat and economic indicators that are coming out of the U.S. and some of the other major markets are improving,” Garman said in a phone interview yesterday. “So we are starting to see transaction volumes increase. We expect that in the remainder of this year.”
Rents at the project have fallen since developers pre-let 61% of office space to tenants including Standard Chartered Plc, he said, without giving details. Garman expects financial firms to follow banks into the towers, mimicking a trend seen in Hong Kong.
Colliers International, in a July report, said 1.4 million square feet of new office space will be completed in the second half of 2009, putting rentals under further pressure. Office supply is already at its highest in three years, according to government data.
“There’s quite a lot of completion next year and 2010 and demand doesn’t seem to be picking up anytime in the short term,” said Tay Huey Ying, Singapore’s director of research and advisory at Colliers International. “Developers will have to look to competitive rents in order to boost pickup.”
Standard Chartered has pre-let 500,000 square feet and DBS Group Holdings has secured 700,000 square feet of Marina Bay Financial Centre. The complex includes two residential and three office towers. About 1.6 million square feet of office space will be launched next year.
Singapore-listed Hongkong Land, one of the biggest business-district landlords in Hong Kong, said Aug. 6 underlying profit rose 16 percent in the first half as rental income increased. Its shares have gained more than 60 percent this year, compared with a 48.5% gain in the Straits Times Index.
Source: The Edge, 13 Aug 2009