IBM's Red Hat tipped to lease almost 60,000 sq ft at CapitaSpring

Singapore

THE office component of integrated development CapitaSpring received Temporary Occupation Permit (TOP) last week, with about 90 per cent of the 635,000 sq ft net lettable area of office space in the integrated project either committed or in advanced negotiation, BT understands.

Word on the street is that Red Hat - an IBM subsidiary software company that provides open software products to enterprises - is expected to lease close to 60,000 sq ft on two and a half floors at CapitaSpring, which is near Raffles Place MRT station.

Red Hat will be relocating from Axa Tower in Shenton Way, which is slated for redevelopment. It currently occupies 33,000 sq ft in Axa Tower, which is opposite Tanjong Pagar MRT station.

Market watchers note that tech companies are among the few segments that are still growing their office footprint in Singapore.

Banks and other financial institutions have been rationalising their office footprints here. That said, new projects such as CapitaSpring provide an opportunity for some of them to move into a newer, better-located building with bigger floor plates in a flight-to-quality exercise. An example would be Sumitomo Mitsui Banking Corporation (SMBC), which is said to have leased some 68,600 sq ft at CapitaSpring.

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The Japanese bank will be moving out of Centennial Tower in the Marina Centre area, where it occupies about 150,000 sq ft. Under a "hub-and-spoke" office model, SMBC is also expected to lease about 45,000 sq ft in Changi Business Park.

Part of the overall reduction in the bank's office space on the island will be due to its adoption of a hybrid work model allowing employees greater flexibility to work from home, said observers.

The bank can also improve the efficiency of its use of space, working with the larger floor plates at CapitaSpring (of about 22,000-23,000 sq ft) and at the Changi Business Park premises that SMBC is contemplating to lease - compared with Centennial Tower's floor plates of 18,000 sq ft. Typically, having more space per floor allows greater space efficiency by reducing duplication of lift lobby and pantry areas, for instance.

CapitaSpring is being developed by a 45:45:10 partnership among CapitaLand Integrated Commercial Trust (CICT), CapitaLand and Mitsubishi Estate Co.

BT understands that committed gross effective monthly office rents in the building have risen to the high-S$12 psf range from mid-S$10 psf in the second half of last year.

The development's first and largest tenant, JPMorgan, signed up in early 2018, at close to S$10 psf. It has leased 155,000 sq ft on levels 24-30 and will be exiting Capital Tower (also owned by CICT), where it occupies 150,000 sq ft.

Other tenants signed up at CapitaSpring include The Work Project (three floors), Squarepoint Capital (which will occupy the highest office floor, Level 49), property consulting group JLL and Saxo Markets.

The 51-storey CapitaSpring has been developed on the former Golden Shoe Car Park and Market Street Food Centre site. The 635,000 sq ft office space, which obtained TOP last week, occupies levels 21 to 49.

The remaining components are expected to receive TOP by year-end.

Besides offices, the project's commercial component includes pockets of retail space amounting to 12,000 sq ft. There will also be serviced residences on Levels 9 to 16, and a food centre on levels 2 and 3 replacing the Market Street Food Centre that once stood on the site.

BT understands that CBRE brokered the leases for SMBC, Squarepoint Capital and Saxo Markets and JLL handled the Red Hat and JPMorgan deals. Both declined to comment on their respective transactions, when approached by BT.

However, CBRE's co-head of office services for Singapore, Lim Lay See, observed that corporates have resumed long-term real estate strategic planning, informed by greater flexibility and the adoption of new hybrid working models.

"In the near term, occupiers remain focused on lease renegotiations and renewals, cost savings and a flight-to-quality strategy that can capitalise on current rental rates which are still attractive," she noted.

CBRE's APAC Future of Office Survey published in July found that 50 per cent of firms expect to add office space over the next three years, up from only 23 per cent in the previous survey in October 2020.

Ms Lim added: "In Singapore, we observe that tech companies and investment houses are also exhibiting expectations for higher growth in office leasing demand."