A new space race is up and running, and it is happening in downtown Singapore, with global firms signing ever bigger deals to lock in office

A new space race is up and running, and it is happening in downtown Singapore, with global firms signing ever bigger deals to lock in office real estate in the face of an unprecedented squeeze.

And it is not just buildings under construction, like the Marina Bay Financial Centre (MBFC), but ones that are still little more than glints in developers’ eyes.

It is all a far cry from a few years ago, when rents were tumbling.

The shoe is on the other foot now, with rents for prime space - if any can be found - going through the roof.

Grade A office rents - the most coveted space in prime areas - rose nearly 23 per cent in the first quarter to $11.80 per sq ft (psf), according to data from Jones Lang LaSalle.

Indeed, rents are rising so fast there are concerns they could eventually affect costs to the point that firms limit their expansion here, said a market watcher.

It is also forcing major financial institutions to book ahead to reserve their spots in the limited number of buildings on the drawing board that offer the large, contiguous space they need.

Some are looking at space coming onstream in 2009 and beyond, consultants said.

‘It’s partly a result of Singapore’s positioning itself as a financial centre and partly the result of tight supply,’ said Jones Lang LaSalle’s regional director, head of markets, Mr Chris Archibold.

‘This will continue for the next year or so, for new buildings coming onstream in two to three years’ time,’ he said.

While phase one of the MBFC is not due for completion until early 2010, one third of its 1.62 million sq ft of office space has already been spoken for.

Standard Chartered Bank pulled off a coup this week by tying up 24 floors of phase one in a 12-year lease.

The supply squeeze has prompted market players and the Government to release more space, but much has already been snapped up.

The Merrill Lynch Harbourfront building, which will be ready in 2008, was fully taken up by late last year.

Other financial institutions such as Citigroup and Credit Suisse could all be looking for more space, said market watchers.

On-going redevelopment of several buildings, such as Overseas Union House, Straits Trading Building, 71 Robinson Road and the Asia Chambers Building, has added to the pressure on supply.

But that has not stopped some firms from trying to lock up space when the buildings come back onto the market after 2009.

In 2010, Harbourfront offices will provide more space while Ocean Building - if it is turned into offices - could yield 832,000 sq ft by 2011.

Rental rises will ease as supply lifts over a three- to five-year horizon, said CB Richard Ellis executive director Moray Armstrong.

Hongkong Land, part of the group developing the MBFC, has increased the amount of office space at the centre to meet increased demand.

Mr Robert Garman, its director of commercial property, South Asia, said about 3.5 million sq ft out of the 4.72 million sq ft area of the entire MBFC will be offices, he said.

Mr Garman said talks are on-going with several parties to lease a further 1 million sq ft of space in phase one. The deals are likely to be signed within a year, yet the building will not be completed until 2010.

Phase one of MBFC has two office towers and a fully-sold residential tower.

Source: The Straits Times, 21 April 2007