On Feb 7, listed property group Frasers Centrepoint announced that 30% of office space in its 38-storey Frasers Tower has been pre-leased, or received leasing proposals. The first tenant to sign on was serviced office provider The Executive Centre, which will be taking up 20,000 sq ft or an entire floor within the building. There will also be an element of coworking within the space, says Loh Chee Wah, Frasers Centrepoint’s head of commercial for Singapore.
Interest in the office space at Frasers Tower has come from a broad spectrum of companies, ranging from conglomerates to financial institutions, media groups, legal and professional services and tech firms. Frasers Centrepoint itself will be taking up one floor for its “city office”, while its corporate headquarters will remain at Alexandra Point.
Frasers Tower, located at the corner of Cecil Street and Telok Ayer Street, is scheduled for completion in 2Q2018. The 235m-high tower will contain 663,000 sq ft of net lettable office space. Adjacent to the office tower is a three-storey retail podium with 22,000 sq ft of space.
The office tower has average floor plates of 20,000 to 22,000 sq ft, and can accommodate up to 300 people per floor. As the floor plates are regular in shape, they can be sub-divided into smaller units of 4,000 to 5,000 sq ft each. This allows tenants the flexibility to customise their space more efficiently, Loh explains.
Rents to bottom out by mid-2016
The closest new office tower to Frasers Tower is Guoco Tower at Tanjong Pagar Centre. A 38-storey Grade-A tower with a net lettable area of 900,526 sq ft, Guoco Tower is 90% leased, according to Chris Archibold, JLL head of markets Singapore.
Over at Marina One, a giant mixed-use scheme by M+S, a joint venture (JV) between Malaysia’s Khazanah Nasional and Singapore’s Temasek Holdings, about 60% of the 1.88 million sq ft of Grade-A office space has been preleased ahead of its completion later this year.
With the good take-up rates at these projects, “the timing for the launch of Frasers Tower is perfect from a supply standpoint”, says Moray Armstrong, CBRE managing director for advisory and transaction services.
Frasers Centrepoint’s Low reckons the Grade-A office space market will bottom out towards mid-2017, with rents expected to recover in 2H2017. “We are, therefore, in a situation where we’re completing the building in a strengthening market,” he says.
‘Flight to efficiency’
For the whole of 2016, the net take-up rate for office space island-wide was about 1.15 million sq ft, indicating strong demand, Armstrong notes.
JLL’s Archibold reckons if the take-up rate for office space in 2017 mirrors that of 2016, he foresees the bulk of the remaining office space at Marina One and Frasers Tower being taken up by the end of this year.
Over the past 12 to 18 months, many of the leasing deals in Guoco Tower and Marina One were made by companies moving from the older buildings in the CBD, adds Archibold. He reckons Frasers Tower will see the same kind of movement, with a “flight to efficiency” rather than “flight to quality”. JLL and CBRE are the joint marketing agents for Frasers Tower.
What is interesting is that owing to competition for tenants, the gap between new and older Grade-A office space has narrowed over the same time frame. JLL says monthly rental rates of new prime Grade-A office space, currently in the range of $8 to $10 psf. Meanwhile, older Grade-A office buildings are seeing monthly rental rates of $7 to $9 psf.
Next wave of new supply after 2020
The next wave of new office supply will only come after 2020. There are three new projects in the pipeline. One of them is the redevelopment of the CPF Building at 79 Robinson Road into a new Grade-A office tower with 500,000 sq ft of space by Ascendas-Singbridge Group, in a JV with Mitsui & Co and real estate developer Tokyo Tatemono Co.
CapitaLand Commercial Trust announced last October that it has submitted plans to redevelop the Golden Shoe Car Park into a commercial development with a 280m-high office tower and a government-owned food centre. The new project could have a gross floor area (GFA) of about one million sq ft, and is expected to be completed in 2021.
In November, Malaysia’s IOI Properties Group submitted the highest bid of $2.67 billion ($1,689 psf per plot ratio) for a 99-year leasehold white site at Central Boulevard. The 1.1ha site has a maximum GFA of 1.52 million sq ft, with at least 1.08 million sq ft designated for office use.