Prospects for Singapore commercial real estate looking up

Jun 17, 2018

Christine Li

Prospects for the Grade A office market are looking brighter after two years of weak demand.

Gross effective Grade A rents tracked by Cushman & Wakefield Research have grown by 10.7 per cent cumulatively since the recovery in the second quarter of last year, with multinational companies taking up swathes of space in premium buildings in Raffles Place and Marina Bay.

The long-term potential for rents is positive, supported by demand from growth sectors such as co-working and technology and dwindling business park supply. The widening rental gap with Hong Kong also makes Singapore a much more attractive location for businesses to set up their regional and global hubs.

Leasing activity in the Central Business District (CBD) remained robust during the first three months of this year, with Frasers Tower's pre-commitment rate rising to 85 per cent ahead of its mid-year completion.

Recent major deals regarding the project include French oil giant Total taking up 125,000 sq ft, ABN Amro leasing 44,000 sq ft and Sumitomo Corporation inking a lease for 43,000 sq ft.

Limited availability is expected to continue through 2020 in the CBD. Frasers Tower and 18 Robinson will contribute 823,000 sq ft of new space in terms of net lettable area this year. The redevelopments of Park Mall and Funan will result in 557,000 sq ft entering the market next year.

Supply will remain stable in 2020 with 644,000 sq ft from the redevelopments of CPF Building (known as ASB Tower) and Afro Asia Building.

Occupiers will only feel the relief in 2021, when the next large wave of supply totalling 1.9 million sq ft is completed. This comprises the Central Boulevard Government Land Sales site and CapitaSpring.

Suburban offices will soon be in demand by cost-conscious companies that do not need to have a presence in the CBD. Rising CBD rents have also prompted some occupiers to consider decentralised locations.

As such, pre-leasing at Paya Lebar Quarter rose to more than 50 per cent, with SMRT relocating its headquarters and taking up 100,000 sq ft. With vacancies in Grade A properties declining at a steady pace, rents are on track to attain a 10 per cent increase this year.


The retail segment is finally seeing some light at the end of the tunnel after a continuous correction over the last three years.

Urban Redevelopment Authority data shows that retail prices and rents have both risen for the first time since the fourth quarter of 2014, registering a 0.1 per cent quarter-on-quarter increase in the first three months of this year.

This could be attributed to improved retail sales in the first two months of the year as well as encouraging tourist arrivals in January.

The retail scene continues to see casualties with operators such as Banana Republic, Gap and American Eagle Outfitters closing their stores. Nonetheless, we believe we could be approaching the bottom as the economy continues to improve.

Despite the tough operating environment, retailers are still keen on suburban malls, as evidenced by the strong pre-commitment rates at the upcoming PLQ Mall and Century Square.

PLQ Mall recently reported a 50 per cent pre-commitment from tenants that include Shaw Theatres, FairPrice Finest and Kopitiam.

Century Square, which will re-open in the second-half of the year after a $60 million refurbishment, is more than 85 per cent pre-committed, with space booked by Hai Di Lao, Mahota Market, Totts, The Food Market, Gymmboxx, Filmgarde and Learning Lab.

Landlords and retailers are adapting to stay at the forefront of the retail scene. CapitaLand Mall Trust (CMT) has partnered e-commerce player Lazada to introduce click-and-collect lounges at seven of CMT's malls as part of efforts to marry the offline and online shopping experience.

Additionally, Fashion and Lifestyle retailer FJ Benjamin is setting up an advisory board to help integrate its physical stores and online sales channels as it pursues an omni-channel strategy.

Landlords are also becoming more receptive towards having co-working operators in the malls to curate experience as a community hub. WeWork is leasing 40,000 sq ft at the upcoming Funan, some in the retail portion. Spaces, a co-working concept by IWG, will occupy more than 35,000 sq ft at One Raffles Place Shopping Mall.

Potential synergies can be realised, as landlords can drive occupancy and footfall, while co-working members, can showcase their products and run pilot projects in the mall to gain potential clients via heightened brand awareness. Retailers can also enjoy first-hand access to the latest retail innovations.

•The writer is senior director and head of research at Cushman & Wakefield Singapore.