Thursday, May 20, 2010

New office projects see space snapped up

Buzz focused on to be completed Ocean Financial Centre, 50 Collyer Quay

The upswing in office leasing deals continues, helping to absorb more of the space in new office projects being built.

Much of the latest leasing buzz has focused on Ocean Financial Centre (OFC) and 50 Collyer Quay, which are completing next year, as well as 71 Robinson Road, which was completed last year.

Law firm Drew & Napier is believed to have inked a lease for 93,000 sq ft at OFC. ANZ is said to be finalising a lease for about 200,000 sq ft in the same building.

A stone's throw away at 50 Collyer Quay (where Overseas Union House used to stand), German fund manager SEB has been secured as the maiden tenant and market talk is that Bank of America could lease more than 100,000 sq ft in the office block.

While some of the new leasing deals in the market involve tenants playing a game of musical chairs as they move from older buildings to newer office towers, many are taking more space in their new premises than what they will be giving up to cater for a future rise in headcount amid a brightening economic outlook in Singapore.

'The musical chairs impact will be cushioned by an improvement in net demand as businesses are in expansion mode again,' says Savills Singapore's commercial leasing director Agnes Tay.

Asking rents at Grade A office buildings, particularly the newer properties, have also started to inch up, according to some agents.

At OFC, which is expected to be completed in two phases in the first half of next year, Drew and Napier will occupy five floors in the 43-storey office tower's low-rise zone. It will be moving out of Ocean Towers next door. Keppel Land is the landlord for both properties.

ANZ is expected to occupy 13 levels in OFC's mid-rise zone. This is nearly a quarter of the building's 850,000 sq ft net lettable area (NLA). BT understands that the space that ANZ will be leasing will be at least double what it currently occupies at OUB Centre, which it will be vacating.

Other tenancies clinched earlier at OFC include DMG & Partners Securities, Verizon Communications and Ifast - all of which will move out of Ocean Towers. Once the ANZ deal is finalised, about two-thirds of OFC would be pre-let.

KepLand will integrate its OFC development with Ocean Towers' podium block, which will be used as car parking, but tear down the office portion of Ocean Towers as this space has been calculated into the allowable gross floor area for OFC.

At 50 Collyer Quay, SEB has signed a lease for over 30,000 sq ft. Bank of America is also expected to head its way. It is currently at Republic Plaza. Over at 71 Robinson Road, IT software firm Sungard is committed to lease 30,000 sq ft. Says Jones Lang LaSalle's head of markets Chris Archibold: 'We expect to have 71 Robinson Road 50 per cent committed within Q2 this year.'

JLL is the marketing agent for the building, which has NLA of 238,000 sq ft.

Cushman & Wakefield managing director Donald Han says that strengthening office demand has led to owners of some buildings raising asking rents. The asking average monthly rents in new Grade A buildings are currently hovering at $8-$9 per square foot, up from $7-$7.50 psf at the start of this year, he added.

Colliers International executive director Calvin Yeo said that some of the incentives offered by landlords last year, such as paying for tenants' fit-out costs and giving them rental holidays, are being removed from the negotiating table.

Agreeing, CB Richard Ellis executive director of office services Moray Armstrong observes: 'There's a change in negotiation dynamics. From an occupier perspective, the window of opportunity was at its optimum level in H2 2009 to early 2010, but there's still plenty of good quality space available.'

Slightly over half of the five-million-odd sq ft of Grade A new office space completing in 2010-2012 has been pre-let, giving rise to concerns of a potential shortage of new completion in 2013-2014, assuming that the current upswing in demand continues.

Grade A office rents are expected to pick up 5 to 10 per cent this year, with more significant appreciation predicted in the next two years, say some agents.

Source: Business Times, 20 May 2010

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