Friday, September 15, 2006
[RealEdge] BT : Redevelopment may tighten CBD office space by 1.5m sq ft
| Published September 15, 2006  | |||
| Redevelopment may tighten CBD office space by 1.5m sq ft This may fuel further rises in occupancy, rents over 2-3 years
By KALPANA RASHIWALA
(SINGAPORE) UIC Building may be the latest ageing office block in the Central Business District (CBD) that could be headed for redevelopment.
Together with a string of other redevelopment candidates - including 1 Shenton Way, Natwest Centre, 71 Robinson Road (the former Crosby House), Asia Chambers, Straits Trading Building and Ocean Building - the total net lettable office stock that could be taken out of the market over the next few years could reach around 1.5 million square feet. That's estimated to be about 7 to 8 per cent of the current available stock in the Raffles Place, Shenton Way and Tanjong Pagar stretch. This will exacerbate the tightening office supply in the CBD while these buildings undergo redevelopment, setting the base for further increases in occupancy rates and rents over the next two to three years, argue some office investors. New office supply this year is estimated at 1.6 million sq ft, mostly from the completion of One Raffles Quay. However, the figure will fall to just 80,000 sq ft next year, then go to 544,000 sq ft in 2008 and 155,600 sq ft in 2009, before increasing back to 1.6 million sq ft in 2010 with the completion of Phase One of the Business & Financial Centre, according to Colliers International. Occupancy rate in the Raffles Place area has risen from 87.1 per cent to 94.4 per cent over the past two years, according to Colliers. In the Shenton Way/Tanjong Pagar location, the occupancy rate has increased from 86.6 per cent to 92.5 per cent. Over the same period, the average gross monthly office rental in Raffles Place has increased 67 per cent to $6.92 per sq ft (psf) currently. For the Shenton Way/Tanjong Pagar area, the increase has been of the order of 55 per cent, to $5.63 psf. While some office industry players argue that office occupancy rates and rents will head further north because of contraction of supply as the likes of One Shenton Way, Straits Trading Building, Ocean Building and possibly UIC Building are pulled down for redevelopment, Colliers International director (commercial) Calvin Yeo says the impact may be mitigated by the fact that the redevelopment may be phased over a few years. 'So not all these buildings will be pulled down at the same time. And at least some of them, like Straits Trading Building and most likely Ocean Building will be redeveloped into new offices, so they will contribute to future office supply after a few years,' Mr Yeo says. Mainboard-listed Straits Trading is expected to tear down its namesake office building at Battery Road next month and build a new 25-storey office tower on the site. Keppel Land is also reportedly planning to tear down the 32-year-old Ocean Building, possibly as early as next year, for redevelopment into a new office block. United Industrial Corporation, which has been buying up strata units at its UIC Building at Shenton Way, now owns 78 per cent of share values in the leasehold property and is said to be mulling over a collective sale. Some prospective tenants have been told they can lease space in UIC Building only until June 2008 with no options for renewal. In order to carry out an en bloc sale, UIC will have to join forces with minority owners of the building controlling additional share values of at least 2 per cent in order to secure the minimum 80 per cent needed for a collective sale. Owners of the other units are said to include Air India, Airtrust (S) Pte Ltd, Shankar's Emporium group, Comcraft Asia Pacific and property group Lee Tat. Industry observers say that Asia Chambers, with about 64,000 sq ft of net lettable area, is also issuing new leases for only a year. Its owners have secured approval from the Urban Redevelopment Authority to redevelop the property into apartments with commercial use at street level - similar to approvals given for the respective redevelopment schemes for 1 Shenton Way, NatWest Centre and 71 Robinson Road. | |||
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