Harnessing the potential of a new CBD

Plans are afoot to transform the Jurong Lake District (JLD) into a second CBD in Singapore, but the window to ride this transformational wave through strata commercial spaces may be fast closing.

As it is, there is a lack of supply in strata-titled commercial units for sale in the 360-ha district.

Current government restrictions on strata subdivision of commercial spaces mean that opportunities to own strata commercial units in the transforming district will be even more limited.

But interest for strata offices has improved on the back of a broader recovery in the office market since the second half of last year.

The number of strata office transactions in 2017 jumped 20 per cent from a year ago to 331, data from OrangeTee Research shows.

Newly completed Vision Exchange, a mixed use development comprising offices, approved medical suites and food and beverage outlets, is the only strata commercial development available for sale and lease in varying sizes, ranging from 500 to 25,000 square feet.

OrangeTee research and consultancy head Christine Sun notes that strata office transactions have recovered steadily from the low of 2015. Demand has risen on the back of a more modest supply for 2018-2019, and dips in vacancy rates as a result of the expansionary business activities led by the financial, service and professional sectors.

"Looking ahead, we believe that the better demand and supply dynamics should benefit office landlords over the next few years. Ms Sun says.

Office rents are recovering from two years of rental lull, with the official rental index showing a 0.4 per cent uptick in the Central Region last year. There is now a general consensus among analysts that the upward momentum will continue this year on the back of continued healthy demand.

Value in decentralised commercial hubs

CBRE head of research for Singapore and South-east Asia Desmond Sim has forecast that Grade A core CBD rents will increase at a faster pace than decentralised office rents, and that the rental premium between CBD rents and decentralised office rents is expected to widen once again.

This creates an impetus for cost-conscious occupiers to move to decentralised offices where they can pay a fraction of what it would cost to be in the CBD, he wrote in a report last September.

Key office attributes that are essential to making decentralised offices viable to potential tenants include high connectivity, accessibility to a wide range of amenities and Grade A office specifications.

On that note, JLD stands out as a decentralised commercial hub as it shapes up into a top-tier destination for businesses, lifestyle and entertainment activities.

It is strategically located near high-value industries, one north business park in Buona Vista, and two world-class research universities.

Since the blueprint for JLD was first unveiled a decade ago, new malls and offices have already sprung up in the district, clocking high occupancy rates.

Transformation underway

Last August, the Urban Redevelopment Authority launched a draft masterplan to elevate the district to a second CBD and a sought-after living environment.

The goal is to provide more than 100,000 new jobs in sectors such as maritime, infrastructure and technology, as well as a further 20,000 homes.

Major infrastructure projects, namely the Tuas mega port and the High Speed Rail (HSR), will help accelerate JLD's metamorphosis.

Government agencies Building and Construction Authority and the Agri-Food & Veterinary Authority of Singapore have already moved to Jurong East. There are more to come, with the Ministry of Transport and the Land Transport Authority also relocating to the precinct. Clearly, the JLD is becoming attractive to companies hailing from innovation-driven companies, finance-related services, research and development, infrastructure development and the maritime services sector.

With over a million residents living in the west, JLD is well-placed to grow into a vibrant mixed-use business district, with its own live-in population and ready talent pool for businesses to tap.

Upside potential

Located within the 360-ha Jurong Lake District, Vision Exchange is currently the only development in the district offering premium strata-titled commercial spaces of varying sizes for sale or lease.

Its office units, approved medical suites and food and beverage outlets can be tailored into efficient spaces, catering to a broad range of business activities.

The building is easily accessible by both public and private transport, being minutes away from major expressways and connected to both the Jurong East MRT station and bus interchange via sheltered pedestrian walkway.

The connectivity of Vision Exchange has been enhanced with the opening of the new Tuas West extension on the East-West train line. This will be followed by the completion of the Jurong Region line by 2025 as well as the future Cross Island Line that provides direct connectivity to Changi Airport.

So far, Sim Lian Group sold 75 per cent of the launched units at Vision Exchange. It has retained larger office spaces on top eight floors of the 25-storey development for lease after it saw demand for larger spaces in the precinct. Strata units on the first two floors have been fully sold for F&B use and medical suites.

The strata office units sold range from 500 sq ft to about 1,500 sq ft while the smallest available unit for lease by the developer starts from 2,500 sq ft. In this way, the strata units and the retained units by the developer cater to the different needs of office occupiers.

Interest picking up

Signalling steady demand, the developers' retained units are already more than 50 per cent leased with several other major tenants looking to relocate there.

The current tenants hail from wide-ranging trades such as medical, corporate services, finance, engineering, building consultants as well and shipping and marine sectors.

Among recent leases, serviced office provider Regus and an insurance company are each taking up an entire floor at Vision Exchange.

OrangeTee Advisory managing director Marcus Oh notes that strata office investment is becoming relatively more attractive as government policies have been focused on dampening the residential segment, rather than other segments of the property market.

Mr Oh adds: "Strata commercial space will likely see an uptick in investment interest due to relative tightening of investment quantum between residential and commercial properties, lower acquisition and disposal costs and barriers, limited supply as well as ease of management."