Demand for office space is so strong that firms in Singapore

Demand for office space is so strong that firms in Singapore are scrambling for the chance to lease old state buildings such as a former primary school and a former police office.

The Singapore Land Authority (SLA) has just put up three more vacant state buildings for use as office space.

And it yesterday awarded the lease of the first of these old state buildings, the former River Valley Primary School, for use as office space.

Prime office space is so scarce that rents are escalating and some companies have been forced to move out of the Central Business District (CBD) to look elsewhere.

The SLA’s move may help to ease the tight supply slightly as its properties may attract firms which want to avoid rising office rentals in the CBD, said Mr Nicholas Mak, the director of research and consultancy at Knight Frank.

A DTZ Debenham Tie Leung report said prime occupancy costs in Raffles Place have escalated by 28 per cent in the first quarter to $10.90 per sf ft (psf) on average.

A record 15 bids have been received by the SLA for a favourably located Cantonment Road property - the former Corrupt Practices Investigation Bureau (CPIB) office.

Usually, only a few bids are submitted for tenders to lease such properties.

The SLA first made some buildings available for office use in February. Nine buildings have been offered so far.

One of them, the former primary school in River Valley Road, was awarded yesterday to investment holding company ERC Holdings. It won the tender with an offer to pay a monthly rent of $75,555 - the highest of four bids.

Its chief executive, Mr Andy Ong, said the firm will spend $3 million to $5 million on refurbishments, such as the addition of carpark lots and air-conditioning.

The building will have a boutique office concept, offering furnished, well-designed offices to meet tenants’ needs.

Mr Ong said ERC will keep one of the two blocks for its own use and sublet the other block, which will have a 2,500 sq ft food outlet.

Already, he has had inquiries from parties such as publishing firms and a foreign bank on the lookout for backroom operation space.

‘It’s a matter of whom we want as a tenant,’ said Mr Ong, who intends to sublet his space for a monthly rent of $4.20 psf to $5 psf.

He will keep half of his current space in the CBD, where his landlord tripled his rent.

The SLA said the top bid for the former CPIB building was $91,731 a month - 70 per cent above the guide rent. It came from Bravo Building Construction. The lowest bid was $27,000.

The SLA is now evaluating the bids for its other properties.

The former Moulmein community centre attracted two bids. One of them came from Phillip Securities, which said it has no plans to move out of its current premises, regardless of the tender results.

There were also two bids registered for the former Pasir Panjang ITE, with the highest coming in at $288,999 from a new property management firm, RichZone Properties Investment.

Also, the SLA has received one bid for the former CAAS building in Upper Changi Road North. The tender for this property had closed earlier without any bids.

Meanwhile, two more buildings - one in Pearl’s Hill Terrace and the other in Raeburn Park - have been put up for lease.

A third - the former Bukit Ho Swee community centre - will be tendered out for lease today.

Easing the crunch

The SLA’s move may help to ease the tight supply slightly as its properties may attract firms which want to avoid rising office rentals in the CBD, says Knight Frank’s Mr Mak.

Prime occupancy costs in Raffles Place have escalated by 28 per cent in the first quarter to $10.90 psf, says DTZ Debenham in a report.

Source: The Straits Times, 08 June 2007