Govt could release office sites again next year

Wheelock Properties boss cites firming in office rents, and suggests govt will act fast to keep rents reasonable.

THE government could release two or three large office sites for sale fairly soon - as early as first half next year - as office rents are starting to firm, says Wheelock Properties (Singapore) CEO David Lawrence, based on his experience with the group's Wheelock Place office tower.

The sites could be in the Marina area and part of the confirmed list, he said in a recent interview with BT.

A potential tenant was recently in discussions with the property group to lease a 4,000 sq ft office unit at Wheelock Place in Orchard Road. But when it was a day late reverting and the offer deadline lapsed, Wheelock immediately signed a deal with another party at a rental rate $1 per sq ft more than that discussed with the earlier party, Mr Lawrence disclosed. He declined to give further details, citing confidentiality reasons.

According to him, the slight pick-up in rents probably has to do with Singapore raising its profile again lately - the way the government has come through the global financial crisis, good corporate governance, the integrity and pragmatism of the government. It is becoming attractive for firms - particularly in commodities, fund management and wealth management - in Europe and the US, who want to tap the Asia growth story, to operate in Singapore.

The same phenomenon is taking place in Hong Kong, he observes.

Hence, notwithstanding the substantial supply pipeline, of about 7.7 million sq ft of offices slated for completion from Q4 this year to end-2012, according to CB Richard Ellis figures, Mr Lawrence believes the government will release office sites quite soon.

'I don't know this for a fact, but I think it is part of government policy or should be part of government policy to keep releasing sufficient land so that office rents are kept reasonable in Singapore, because there are a lot of spin-offs into the economy from having these companies and people in Singapore,' he said.

'Some people will say: 'But that space won't be (completed) for four years.' Actually, as soon as people know there is the expectation of a lot more supply in the future, it tends to have a pretty immediate effect on office rents in fact, because landlords become defensive to keep tenants.

'It has an immediate effect on the psychology of the market and landlords.'

According to CBRE data, the average monthly Grade A office rental value surged from $5.70 per sq ft in Q4 2005 to $18.80 psf in Q3 last year on the back of booming demand and a shortage of space. The government, however, soon responded, releasing office sites in the Marina Bay area, as well as transitional office sites around the island.

When the global economic crisis set in, the hardest hit was the financial industry - key occupiers of Grade A office space - and Singapore's office market was battered. The average Grade A office rent has since slipped to $8.80 psf last quarter.

'They (government) are quite sharp now and they've been very active in the residential sector,' Mr Lawrence said. 'Now this (office) is the one to look at. It's quite difficult with these office rents sometimes. Nobody gets it right all the time. But just releasing the sites will cool the market.

'I think (National Development Minister) Mah Bow Tan is quite aware of what's going on in the office market.

'No problem with sites. The government has been very clever. You look at the Marina area. They have so many sites with the infrastructure ready to go.'

Source: Business Times, 31 Oct 2009