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Relocations, tenants' surplus space to add over 1m sq ft to office supply: DTZ
[SINGAPORE] Close to one million sq ft of office space will become available next year when tenants move out of existing buildings to their new offices, according to DTZ. In addition, there is currently around 550,000 sq ft of shadow office space - space made available for subletting or reassignment by tenants - plus another 133,000 sq ft of shadow space expected to be released next year.
All these supply sources will mitigate an anticipated supply gap next year. According to DTZ's calculations, there will be a net increase in office supply of only 159,000 sq ft next year.
It arrived at the 159,000 sq ft figure based on the 826,000 sq ft of new office space expected to be completed in 2015 and factoring in the removal of existing stock from the office market at Equity Plaza (258,000 sq ft) and other buildings such as Keypoint in Beach Road (268,000 sq ft) and 2HR in Havelock Road (141,000 sq ft) for redevelopment or refurbishment.
As a result, DTZ regional head (SEA) research Lee Lay Keng said that Singapore CBD office rents are projected to continue their upward trajectory next year, though at a slightly slower pace of 10 per cent - after an expected growth of nearly 15 per cent for this year.
In their lease negotiations next year, landlords and tenants will no doubt also factor in the whopping 3.9 million sq ft of office space that is expected to be completed in 2016, Ms Lee added.
For this year, the total office completion is expected to be around 2.4 million sq ft.
DTZ said that the average gross monthly rental for office space in Raffles Place rose 2.7 per cent to S$10.55 per square foot in the third quarter of this year from a quarter earlier. The bulk of the one million sq ft of offices that are expected to be vacated next year is in the CBD.
"CapitaLand will vacate its offices at Robinson Point and will consolidate its operations at Capital Tower," said DTZ. "Other occupiers that are leaving their existing offices include the Agri-Food and Veterinary Authority of Singapore (AVA) and the Building and Construction Authority (BCA), which will move out of their headquarters in the MND Complex in Maxwell Road by the end of this year to relocate to Jem in Jurong East."
Cargill will also be releasing its space in The Concourse in Beach Road and relocating to the soon-to-be completed CapitaGreen in Market Street in 2015.
As for the shadow space that could become available next year, this would be from occupiers such as Standard Chartered Bank, which is expected to release three to four floors (60,000-80,000 sq ft) of its space at Marina Bay Financial Centre Tower 1 when it relocates some operations to its new Changi Business Park campus, said DTZ.
The group also said that islandwide, net absorption of office space increased by 43 per cent quarter on quarter to 443,000 sq ft in Q3, with occupancy rates rising by 0.8 percentage point to 95.8 per cent. This takes overall net absorption in the first nine months to 1.1 million sq ft, up from 0.9 million sq ft in the same period last year.
"Islandwide occupancy was also higher in Q3 as there were no new completions in the quarter. Net supply was negative 67,000 sq ft after the removal of 700 Beach from the office stock as it is undergoing redevelopment into a 300-room hotel," said DTZ.
Full research report is available on BTInvest (http://www.btinvest.com.sg/property)