Published January 13, 2010

Nomura tipped to lease 100,000 sq ft in MBFC

The bank will give up the space it occupies at Suntec, Six Battery Road


(SINGAPORE) The flight to newer office buildings continues. Marina Bay Financial Centre (MBFC) is close to clinching another tenant, Nomura Singapore.

The Japanese bank, which acquired the former Lehman Brothers' operations in Asia in late 2008, is expected to lease about 100,000 square feet in MBFC's Tower 2, which is slated for completion around the middle of this year.

BT understands that the signing rent is slightly below $9 per square foot (psf) a month. Market watchers suggest that the headline rent, which appears to be high for a space this size, could be due to Nomura planning to begin its lease late - sometime after Tower 2 is complete.

Nomura is expected to give up the space that it is leasing at Suntec City Tower 5 and Six Battery Road - said to total about 90,000 sq ft - and move to MBFC either later this year or early next year.

Sources suggest that it would occupy the middle stack of floors in the 50-storey MBFC Tower 2.

Other tenants in the block include Australian resources giant BHP Billiton, which has leased 231,000 sq ft on the top 11 floors.

Macquarie, Servcorp and Murex South East Asia have also leased space in the tower, which has a total of one million sq ft net lettable area (NLA) of offices.

Tower 2 forms part of MBFC's first phase, which is being completed this year. Next door, the 33-storey Tower 1, with about 620,000 sq ft of offices, is fully let. The major tenant is Standard Chartered Bank; other tenants include French bank Natixis and Wellington International Management Company.

The development's third office tower, a 46-storey block with 1.3 million sq ft NLA, will be anchored by DBS Bank, which has inked a 700,000 sq ft lease.

Tower 3 is slated for completion in 2012 under MBFC's second phase.

Market watchers are cheered by the pick-up in leasing activity since Q4 last year but point out that the bulk of leasing activity currently involves replacement demand, that is, tenants moving from older office blocks to newer ones.

This means that older buildings will continue to come under pressure on rents and occupancy.

Jones Lang LaSalle said last month that the rental gap between newly completed Prime Grade A and other existing Grade A buildings is likely to widen over the next few years.

It has also predicted that for new Prime Grade A properties that have been well received by the market, rents may bottom out as early as H2 2010. However, rents in existing office blocks may continue to slide until the end of the year.

CB Richard Ellis (CBRE) data shows that the average monthly Grade A office rental value eased about 8 per cent quarter on quarter to $8.10 psf in Q4 2009 - the smallest drop in five quarters of declines.

For the whole of 2009, the decrease was 46 per cent; the latest Q4 number is also 57 per cent below the peak of $18.80 psf scaled in Q2/Q3 2008.

The Grade A vacancy rate rose from 4.2 per cent in Q3 2009 to 6.2 per cent in Q4, while the islandwide vacancy rate stayed at 12.2 per cent, according to CBRE.

Office rents are expected to ease further this year, although at a slower pace than in the past 15 months, as the economy recovers, boosting demand for offices, office industry players say.