Friday, October 26, 2007

Higher rents in the Central Business District (CBD) are forcing companies to re-configure their current space

Higher rents in the Central Business District (CBD) are forcing companies to re-configure their current space, or consider shifting part of their operations to other locations.

To meet demand, the government is releasing transitional office sites into the market.

But property watchers say demand remains strong and rents will continue to push upwards.

Property firm Savills can now fit another 10 staff into its Shaw House office at Orchard Road.

It did so simply by halving its reception area.

Like Savills, more companies are reconfiguring their offices to maximise use of space and keep costs down.

Ku Swee Yong, Director, International Marketing, Savills, says: “There is still a lot more scope to restructure office space usage in the CBD - Shenton Way, Robinsons Road, Raffles Place. Many of these so called lower value type of work that probably is not customer facing, for example backroom operations, IT, maybe even administrative, human resource, transaction processing work, could be moved out of the CBD office.”

The government is releasing transitional office sites to help meet demand.

Property watchers say there are sites near the CBD which could be opened up.

Last Friday, the government released a site the size of two football fields at Upper Aljunied.

Mr Ku says: “So if you drive around town, you will see a few more properties, you will see a few more land parcels, just vacant grass land which could be potentially very attractive - for example next to Central Mall, Havelock Road. These sites I think would be a lot more attractive to the MNCs and the financial services industries.”

Consultants say transitional office sites will have little impact on rents in the CBD as they merely absorb low rent-yielding tenants so they can make way for companies who are willing to pay the higher rents.

They might, however, slow down the rate of increase.

Office rents in the CBD have shot up by 60 to 70 percent in the last 12 months.

Donald Han, Managing Director, Cushman & Wakefield, says: “Singapore is being recognised as a hub to position your original business in Southeast Asia as well as the Asian region, so more and more companies are demanding more space and expanding their operations. We are generally looking at almost every company (seeking) a minimal of 20 to 30 percent expansion of space upon every lease expiry, so that adds on to the pressure in terms of demand. So we think that this year, we expect net demand to be 3 to 3.5 million square feet.”

Analysts say Singapore needs about 2 million square feet of office space a year for the next 4 years but supply is estimated at just about half of that.

Source : ChannelNewsAsia - 25 Oct 2007

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