You are here

Ongoing makeover adding value to Beach Road's commercial markets

Move over Marina Bay, the new kid on the block is the Beach Road/Ophir-Rochor Corridor - and it's ready to rock.

South Beach (the towers in the middle and on the right) kick-started the rejuvenation of the area. Shaw Tower (left), is slated for redevelopment in 2020, expanding its office space from 260,000 sq ft to 400,000 sq ft. The new project is marked for completion in 2023.

The completion of DUO Tower was a game changer. It led to the arrival of major multinational companies - such as Abbott, Mastercard and Sumitomo Chemicals - despite it being located at the edge of the CBD.

Coming up next is Kampong Bugis, the site of the former Kallang Gasworks plant. The vision is for a car-lite waterfront community with 4,000 homes by 2030.

A SLEW of exciting upcoming projects ranging from mixed-use development, commercial, residential to hotel will rapidly transform the Beach Road/Ophir- Rochor Corridor in the years ahead, stealing the limelight from Marina Bay and Tanjong Pagar's array of skyscrapers and iconic landmarks in recent years.

The area, encompassing properties along the stretch of Beach Road, Rochor Road and Ophir Road, is fast becoming a new hotspot for work-live-play, as the timely face-lift has helped to transform the relatively quieter area into a rare gem for the younger generation which is experience-focused and fun-oriented.

South Beach kick-started the rejuvenation of the area after the office component's long-awaited completion in 2015, breathing new life into the vicinity. Across the road, Suntec City also concluded its three-year makeover of its retail mall and convention centre during the same year, repositioning itself as a premier lifestyle destination.

The latest addition, completed in 2016, is DUO, a mixed-use development with office, retail, hotel and residential components. The project was developed by M+S, which is a 60:40 joint venture between Khazanah Nasional Berhad and Temasek Holdings.

In fact, over a short span of just two years, Beach Road/Ophir-Rochor Corridor's total office stock has seen a 13 per cent increase from 8.5 million square feet (sq ft) to 9.6 million sq ft. The injection of South Beach and DUO has complemented the existing commercial offerings which include The Gateway, The Concourse, Parkview Square and Bugis Junction.

Since overall Grade A office rents bottomed out in the first half of 2017, office rents in the vicinity have seen a jump of 20 per cent for the City Hall/ Marina Centre sub-market and 16 per cent for the Bugis sub-market. We expect rents in the vicinity to rise by a further 5 to 8 per cent in 2019.

Bright outlook for commercial leasing & investment

Beach Road/Ophir-Rochor Corridor offers a plethora of choices for office occupiers. Office tenants value the area for its central location, strong transport connectivity and abundance of amenities. It is also a short distance from the core Central Business District (CBD) such as Raffles Place and Marina Bay.

The completion of DUO Tower was the game changer. It led to the arrival of major multinational companies despite it being located at the edge of the CBD. For instance, global healthcare company Abbott seized the opportunity to consolidate its operations from multiple locations across the island, becoming the building's first anchor tenant by leasing 100,000 sq ft of space.

Shortly after, both Mastercard and Sumitomo Chemicals embarked on a flight-to-quality strategy and relocated their offices from The Gateway, leasing a sizeable 74,000 sq ft and 30,000 sq ft respectively. Subsequently, Chevron relocated from Chevron House in Raffles Place, committing to 72,000 sq ft in DUO Tower.

Office rents in the area, previously hovering around S$7 to S$9 per sq ft per month, received a boost from DUO Tower, with the project currently achieving gross effective rents of around S$12 per square foot (psf) per month. This is close to what premium office buildings in Marina Bay and Raffles Place can fetch, demonstrating the ability of brand new offices in the area to command premium rental rates. Demand for prime office space in the project remains robust with the project's occupancy rate in excess of 97 per cent.

Other office developments will soon spring up. GuocoLand and Guoco Group clinched the tender for the Beach Road land parcel at S$1.62 billion or S$1,706 per sq ft per plot ratio (psf ppr) at a 2017 state tender, a new benchmark for the area.

GuocoLand and Guoco Group intend to make Guoco Midtown the new landmark of Beach Road/Ophir-Rochor Corridor. Apart from connecting City Hall/Marina Centre and Bugis, the integrated development with a major office component of 650,000 sq ft, will be served by major roads in the city centre and Nicoll Highway, as well as the North-South Expressway in the future.

Judging from the stellar performance of the adjacent South Beach and DUO Tower, coupled with limited supply over the next three years in the vicinity, Guoco Midtown will be well-received upon its completion in 2022.

Its next-door neighbour, Shaw Tower, has also jumped on the bandwagon and announced its intention to redevelop the ageing building in 2020. The new project, which will expand office space in the development from 260,000 sq ft to 400,000 sq ft, is slated for completion in 2023.

Apart from offices, residential developments in the vicinity have also gathered steam, which could in time lend support to the maturity of the precinct.

Upcoming pipeline projects include Guoco Midtown's residential project, sites in Middle Road and Tan Quee Lan Street. The residential component of Guoco Midtown comprising of at least 200 units, is slated to complete in 2022. Two other sites in Middle Road and Tan Quee Lan Street totalling 955 homes, have also been offered by the Urban Redevelopment Authority under the confirmed list.

Coming up next is Kampong Bugis, the site of the former Kallang Gasworks plant, which borders the prime waterfront along the Kallang Basin. The government plans to tender the entire precinct out to a master developer, who will be tasked with transforming the precinct into a car-lite waterfront community with 4,000 homes by 2030.

As such, the future residential catchment in the area is set to enlarge significantly. This bodes well for the retail sector, potentially extending shopping to a seven-day trading week compared to the core CBD, where retail trading is only five days. In addition, the 342-room Andaz Singapore hotel will provide a constant stream of business travellers which will further boost the retail and nightlife scene in the area.

Investor demand for assets in the vicinity has been on the rise, particularly from institutional investors who see a bright future due to the increasing vibrancy in the area. The early entrants include Lian Beng and Apricot Capital, which acquired Wilkie Edge for S$280 million or S$1,812 psf in 2017. The sale price represented a 39.3 per cent premium over valuation.

Subsequently, ARA Asset Management and Chelsfield teamed up to purchase Manulife Centre at a price of S$555.5 million or S$2,300 per sq ft. This would likely translate into a net yield of 3 per cent or less, a testament to the positive investor sentiment towards the area.

Other landlords are also exploring the possibility of unlocking capital gains, with Keppel REIT stating it was open to the sale of Bugis Junction Towers if a compelling offer was received. Most recently, M+S also placed DUO on the market, with an asking price of S$1.6 billion for DUO Tower & DUO Galleria. It was reported that multiple parties were interested in the asset, and that RB Capital is conducting exclusive due diligence for the purchase of Andaz Singapore hotel for around S$470-480 million.

As the Beach Road/Ophir-Rochor Corridor matures into a full-fledged work-live-play commercial and lifestyle hub over the next decade or so, investors are eager to grasp the window of opportunity before asset prices in the area rise further. A streak of robust transactions is thus expected in the precinct over the next few years, with prices possibly surprising on the upside.

Occupiers are also increasingly attracted by what the area has to offer in terms of new lifestyle and entertainment options, ease of access and its close proximity to amenities. As there will likely be no new CBD supply post-2023 due to the government shifting its focus to decentralisation initiatives over the next decade, the next wave of supply between 2022 and 2023 in the precinct could be the last chance for occupiers to secure premium office spaces in the CBD.

  • June Chua is the head of commercial leasing, Shaun Poh is the head of capital markets and Christine Li is the head of research of Cushman & Wakefield Singapore.

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to