Changi Park Shaping Up As Financial Backroom Hub

Source : The Business Times, January 28, 2008

URA studying plans for Changi Business Park as part of 2008 Master Plan Review

OCBC could soon follow Credit Suisse, Citibank and DBS to Changi Business Park to form a growing alternative financial hub there. And with prime land going for about $60 psf and rentals at between just $4-$5 psf per month, it does seem to make sense.

In response to a query by BT, OCBC head of operations (group operations and technology division) Eugene Sng said: 'We are currently assessing the feasibility of Changi Business Park as an alternative location to house our operations units.'

A-Reit has also revealed that Credit Suisse has committed to take up about a quarter of its new 200,000 sq ft HansaPoint@CBP building, scheduled to get its TOP (temporary occupation permit) in February.

A-Reit is already developing a built-to-suit building for Citibank and Tan Ser Ping, CEO of the reit manager said: 'A-Reit continuously evaluates all potential investment opportunities, both in acquisitions and developments. The outlook for properties in the business and science parks and hi-tech industrial sector is especially strong.'

While business parks are still categorised as industrial space, where at least 60 per cent of the space must be an approved 'predominant activity' like R&D, a check with JTC's website reveals that financial backroom operations now constitutes an approved predominant activity.

The Urban Redevelopment Authority does appear to have new plans for CBP. In response to a BT query, URA said: 'We are studying the plans for the area as part of our Master Plan 2008 Review. More details will be made available later this year.'

CBP is a 66.54 ha business park which currently comprises about 61 development plots. A JTC spokesman said that about 50 per cent has already been allocated. Depending on location and plot ratio, the 30-year leasehold land is leased for about $28.50 to $57 psf.

JTC said that land rents are revised quarterly with a 5.5 per cent annual adjustment escalation cap over the preceding year's rent.

And unlike the Government Land Sales programme, there is no public tender for business park sites and prices are fixed. JTC added: 'All the land plots in CBP are prepared land which can be allocated immediately to companies that can meet our criteria.'

Not surprising then, Cushman & Wakefield (C&W) managing director Donald Han expects that between two to five more sites at CBP could be allocated this year. Already, Mr Han reveals that C&W has three clients looking for possible sites for built-to-suit buildings. Two are from the financial sector.

One of the advantages of built-to-suit premises in a business park is that the potential tenant can specify its own needs. 'As land cost is less, you could have bigger workstations or provide special amenities like a gym and childcare facilities for your staff,' he said.

And for developers, attractive yields of between 5-7 per cent are achievable, added Mr Han, although only JTC approved developers need apply.

The demand for such alternative space was brought about by the severe space crunch in the city. While this may be remedied by a new surge of supply coming onstream around 2010, Colliers International director (industrial) Tan Boon Leong believes that as long as rents remain 'competitive', business park space will remain a viable option.

He added: 'Based on a lease period of 10 years, the developer could recoup 70-80 per cent of its initial investment from its tenant. If the tenant then chooses to move out, the developer can then afford to lease the space out at a lower rent. It's a win win for both developer and tenant.'

Mr Tan does not, however, expect CBP to be a dedicated backroom for the financial sector.
Business environments change and he noted: 'CBP was originally targeted for the aerospace sector.'

Savills Singapore director of commercial services June Chua added that alternative sites in the Alexandra area are also popular. At Comtech, where Deutsche Bank, HSBC and American Express have taken space, rents are equally competitive at around $4.50 psf per month.

Competition for tenants should also increase as Ms Chua expects more industrial grade buildings to be retrofitted and made available for backroom offices as office rents rise.

On the future of the central business district (CBD), Ms Chua believes there will always be businesses who cannot afford to be out of the CBD, despite high rents. 'They may however, be more selective in the future, when more space becomes available,' she said.