State Properties For Office Use See Healthy Take-Up

Source : The Business Times, January 31, 2008

SLA to release more sites this quarter to further ease office space crunch.

Offices in state-owned properties seem to be catching on. After a quick turnaround time of about six months and about $2 million spent, Phillip Securities has opened its new Phillip Investor Hub at the former Moulmein Community Centre this week.

And following the healthy take-up of state-owned properties - 12 out of 15 properties put up for dedicated office use were awarded in 2007 - the Singapore Land Authority says it expects to release another 32,300 square feet of space for potential office use in the current quarter. Properties that have been earmarked include the former Siglap-Changi Community Centre.

SLA says that of the 12 properties , which have a total of over 1.1 million sq ft of floor area, half have achieved full occupancy.

Foster Wheeler, a US engineering and construction services consultancy, is another company that will move to the former ITE Pasir Panjang site, taking up 70,000 sq ft. SLA believes the company’s move will free up 50,000 sq ft in the central business district or CBD.

SLA director of land operations Simon Ong said: ‘More importantly, the relief supply met the immediate need of tenants decanting from prime locations.’

The new Phillip Investor Hub was leased to Phillip Securities after it emerged as the top bidder in a public tender with a bid of $35,000 a month for the 22,593 sq ft gross floor area (GFA) building, or just $1.55 psf per month.

Phillip Securities will still maintain its corporate offices in the CBD, but it is quite happy to expand part of its operations to SLA properties . Phillip Securities business development director for consumer services Lisa Lee said: ‘Since we have spent close to $2 million to renovate the place, we intend to lease the state property from SLA for as long as we can.’

While the new Phillip Investor Hub will occupy 100 per cent of its leased premises, ERC Holdings, which was awarded the former River Valley Primary School property , plans to sub-let part of the property to other companies to cover some of its costs.

ERC chief executive Andy Ong said that it would have spent between $3.5 million and $5 million when the refurbishment is completed.

Already, it has signed tenants including luxury watch maker Audemars Piguet, which will set up a service centre, and restaurant group Senso Holdings.

While occupying old buildings does come with certain challenges - power supply and plumbing being the main issues - ERC has nevertheless decided to move a substantial part of its offices out. Mr Ong said that ERC would give up three-quarters of its 20,000 sq ft office in Robinson Road ‘after the rent was increased by 350 per cent’.

Knight Frank director of business space Agnes Tay said that push factors notwithstanding, these state properties may not be for everyone. ‘Most of these tenants are very clear about what sort of location they want,’ she added.

Knight Frank is the leasing agent for the former ITE Pasir Panjang site, which has a GFA of 218,891 sq ft, at Alexandra Road. The site was awarded to master tenant RichZone Properties for $288,999 a month or $1.30 psf per month.

Ms Tay said that leasing operations began in Q4 last year. About 40 per cent of the property has been leased out so far. Apart from Foster Wheeler, other tenants include electronics giant LG.

Early-bird tenants were also offered rents at about $4 psf per month but potential interest has bolstered rents and Ms Tay said that the asking rent has now gone up to $5-5.50 psf per month.

But because of the capital investment involved in undertaking such a large site, Ms Tay notes that there is little ‘immediate profit’ for the master tenant. ‘This is not a yield-type play,’ she said.

Hean Nerng Investments, which is in the business of managing properties , has leased the former Gan Eng Seng School at Raeburn Park - with a GFA of 160,000 sq ft - for about $200,000 per month or $1.25 psf per month. It is sub-letting the property at about $5 psf per month and sub-tenants include a government agency.

The property is already 60 per cent leased. Refurbishment of the property will be completed by end-February and Hean Nerng expects to have no problem filling it up. Hean Nerng managing director Kelvin Lim noted that his potential tenants are either escaping high CBD rents or looking for space to expand.

And CBD rents are expected to continue rising this year. Ms Tay said that asking rents for some prime Raffles Place office space is now as high as $19-20 psf per month, ensuring that at least a few more old state buildings are likely to get a new lease of life.