The Changing Face Of Office Space

Source : The Business Times, September 27, 2007

CALVIN YEO looks at how the development of New Downtown at Marina Bay will shape new offerings in the current CBD

WITH demand for office space in Singapore outpacing supply in the last three and a half years on the back of healthy economic growth, rents have been surging, with prime space seeing a rise of over 200 per cent since the lows of 2004.

New look: The New Downtown (left) will not only bring a brand new skyline to the existing CBD (next), but also up the standards of design and facilities







Monthly gross rents of Grade A space in Raffles Place grew by a phenomenal 222 per cent from an average $3.95 per sq ft at the trough in Q1 2004 to a record $12.69 psf as at end Q2 this year. Occupancy of office space island-wide hit 92 per cent as of Q2 2007 - the highest level since Q3 1996, with most prime office buildings enjoying near full occupancy.

Against this backdrop of soaring rents and a dearth of supply, office tenants are eagerly awaiting new office stock coming to the market. This will largely comprise prime office developments in the New Downtown at Marina Bay.

Assuming the two new white sites at Marina View currently on tender are developed by 2011, the New Downtown would yield some 5.4 million sq ft of prime office space. This is equivalent to 47 per cent of the current Grade A stock in Raffles Place and Shenton Way/Tanjong Pagar.

The New Downtown at Marina Bay will not only give the Central Business District (CBD) a new skyline, but could also spur higher building standards in the existing CBD. When landlords of existing Grade A buildings in Raffles Place and Shenton Way/Tanjong Pagar redevelop or retrofit their properties in the coming years, they will have to raise their specifications to match those of offices in the New Downtown to stay competitive.

Among other things, this new office space will offer specifications and services catering to the evolving needs of multinationals and match the top standards found in other regional markets such as Hong Kong and Shanghai.
Examples of such specifications include:

* Larger floor plates in excess of 20,000 sq ft, against the current average of 13,000 sq ft

* Enhanced efficiencies with column-free regular floor plates

* Floor-to-ceiling heights in excess of 2.7m

* More robust technical infrastructure, such as dual-feed power supply to overcome power failure, and dedicated emergency power feed.

* New-generation prime office stock in the existing CBD can also be expected to offer services such as regular tenant feedback meetings.

An increasing number of companies are also looking to raise the quality of the work space, as an attractive office environment becomes key in recruiting and retaining the best talents, comprising largely the Generation X and Y workforce who drive change. Such an enviroment will also boost overall productivity. As such, we can expect future Grade A office supply in the existing CBD to feature the following:

* Maximum work space adjacent to natural light and views

* Good ventilation

* Minimal noise intrusion from building mechanical services

* Use of non-health hazardous building materials

* Dedicated higher capacity IT fibre connectivity

* Uninterrupted power supply.

With companies becoming more environmentally aware, tenants would also prefer to locate in an environmentally-friendly office building. This would include features such as efficient energy and water consumption and conservation systems, as well as measures on indoor pollutants against the corresponding green building maintenance and operational guidelines.

Hence, many redeveloped or retrofitted Grade A office buildings in the CBD can be expected to seek a Green Mark certification from the Building and Construction Authority.

In fact, the gentrification of the current CBD had already begun with the redevelopment of buildings such as Crosby House, Ocean Building and Overseas Union House. By 2011, some 3.5 million sq ft of redeveloped Grade A office space in the current CBD is expected to be completed.

Landlords of other older buildings in Raffles Place could choose to retrofit instead. For example, the landlords of 6 Battery Road, Singapore Land Tower and UOB Plaza II have opted for retrofitting. This includes re-cladding the building façade, creating space for cafes, installing multi-media screens, and upgrading lifts, lobbies, toilets and carparks. With this, they can command top rents and occupancy rates.

Second-tier buildings, such as those built on smaller footprints, could find a niche catering to tenants who do not require the most prime office locations or large floor plates. The answer is the boutique office, typically a high quality office building with a smaller footprint. These developments have small floor plates and target smaller space users such as fund managers, private banks, re-insurance firms, professional services firms and regional offices. They offer tenants the prestige and exclusivity of being a full-floor tenant.

The live, work and play concept is taking root here so tenants would appreciate features such as shower and fitness facilities and common break-out areas with wireless computer access and flexible after-office hours air-conditioning arrangements.

In this context, the clustering of eateries, convenience stores, laundries, mobile devices support centres, and covered walkways could just make buildings along a street collectively more attractive.

Some might say the current CBD lacks character. But with the New Downtown as catalyst, the older part of the business district could see an innovative repositioning that would help Singapore's office market gain depth and breadth, catering to a broad range of tenants, from MNCs to boutique operations.

The writer is director of commercial leasing, Colliers International