Less Office Space For Release In H1

Source : The Business Times, April 2, 2008

SLA expects to offer only 34,200 sq m in GFA, down 20% from H1 last year

THE Singapore Land Authority (SLA) expects to release 34,200 square metres (368,125 square feet) in gross floor area (GFA) for office use in the first half of 2008. This is about 20 per cent less than the 43,000 sq m (462,847 sq ft) that was offered in H1 2007.

10 Winstedt Rd: The former Monk's Hill Secondary School in the Newton area has a GFA of 7,700 sq m and a guide rent of $147,300 a month

SLA director (land operations - private) Teo Cher Hian said that while the tenders for this office space has been ‘well-received with strong bids submitted’, SLA will continue to monitor market take-up and identify more sites with office use, ‘if demand is prevalent’.

Just launched is the former Monk’s Hill Secondary School at 10 Winstedt Road in the Newton vicinity which has a GFA of 7,700 sq m (82,882 sq ft) and a guide rent of $147,300 a month.

This works out to about $1.80 psf per month.

Cushman and Wakefield managing director Donald Han believes that this site is likely to see competitive bidding because of its location.

Already, Ascott Group has moved its Ascott Centre of Excellence to the nearby former Anthony Road Girls’ School and Anglo-Chinese Primary School is understood to have leased a state-owned property at 12 Winstedt Road.

And Mr Han says that 10 Winstedt Road is ‘one of the better sites released in the last 12 months’.

Based on the guide rent of $147,300 per month or about $1.80 psf per month, Mr Han believes that the breakeven rent for the potential developer would be about $2.10 psf per month after factoring construction costs for retro-fitting the property at around $100 psf.

‘The developer could ask for a monthly rent of about $5 psf,’ he added.

However, as Mr Han noted, the general office rental market has begun to show signs of ‘moderation’ of late with landlords ‘reducing their rental expectations’.

And this could affect the demand for retro-fitted state-owned offices.

‘If you price these (retro-fitted state-owned) properties in the $5-$6 psf per month range, you may not see demand coming from users looking to move out of the CBD fringe, where landlords are already trying to retain their tenants,’ said Mr Han.

And as for prime office space, he notes that the financial sector also appears to have ’stabilised in terms of growth’.

‘People looking at these state-owned buildings are usually those that have low budgets for rent.’

Those still looking for a bargain can turn to Jerry Tan, who tendered and was awarded the 145,431 sq ft (GFA) site at 195 Pearl’s Hill Terrace with a bid of $53,501 per month or about 40 cents psf per month last year.

Mr Tan revealed that while units have already been leased out for over $4 psf per month, he intends to start offering units at $3.50 psf per month.

To date, Mr Tan said, he has about five tenants but he hopes to attract more with the lower rents. One of the drawbacks is that the lease for the building is only for three years but Mr Tan said: ‘Start-ups don’t usually intend to sign long leases.’