Ravi Chandran
The Malacca Centre office floors can be sold individually or as a collective basis
CBRE announced recently that it is launching for sale two office floors – Level 9 and 16 – at Malacca Centre, a 16-storey commercial development strategically located in the heart of Raffles Place at 20 Malacca Street. The sale will be conducted by public tender, which will close on 17 June 2021 at 3pm.
The gross floor area of Level 9 is 1,830 square feet, while that of Level 16 is 2,142 square feet. Both Malacca Centre office floors are currently occupied.
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The Malacca Centre office floors can be sold individually or as a collective basis. Indicative prices for Level 9 and Level 16 are S$6 million (or S$3,278 per square foot) and S$6.88 million (or S$3,211 per square foot), respectively. Collectively, the guide price is S$12.88 million (S$3,242 per square foot).
Mr Michael Tay, Head of Capital Markets, Singapore at CBRE said, “Investors continue to show keen interest in Singapore as an investment destination. The strong confidence stems from our city’s economic and political stability, as well as a solid track record of real estate investments that provide growth in capital values. One such asset is strata office spaces which are highly sought after by family offices or high net worth individuals for wealth preservation.”
Mr Tay added, “Against a tight office supply for the next three years, we expect investors to continue to keep an eye on this asset class so as to tap into any potential upside opportunities over the long term. Strata office space of freehold/999-year leasehold tenure in the CBD are rarely made available for sale. The last transaction seen at Malacca Centre was in March 2020 when Levels 11 and 12 were transacted for S$ 6.00 million and $5.82 million.”
One of the few 999-year leasehold commercial building that sits just above Raffles Place MRT Interchange, Malacca Centre also features retail units on the ground floor and basement level. The building greatly benefits from the coveted sheltered access to Raffles Place MRT Interchange and Downtown MRT station, as well as to nearby landmarks including Capita Spring, One Raffles Place, Republic Plaza.
Mr Paul Ho, chief mortgage officer at iCompareLoan, said: “Covid-19 will accelerate the speed of disruptions in all industries and the real estate sector will be no exception.”
He added: “Office usage and demand will be affected after this circuit breaker period is over. There will always be a demand for office space, but investors will be more selective going forward.”
An earlier research by CBRE said that the office rents recovery will come on the back of Ministry of Trade and Industry’s projection that the Singapore economy will grow by 4% to 6% in 2021. Nonetheless, office demand is expected to remain relatively subdued in 1H 2021, as firms will still remain cautious in the wake of the COVID-19 pandemic. Should economic activity and business sentiment recover after the administration of the vaccine by Q3 2021, the office market is well poised to benefit from the gains in employment.
Five new projects are estimated to complete in 2021, which will add another 1.23 million square feet to the entire office stock. Out of these five, there is only one Grade A office development – CapitaSpring, which will add another 0.65 million square feet of office stock to the Grade A (Core CBD) market.
Mr Desmond Sim, Head of Research, Singapore and Southeast Asia, CBRE, says, “Leasing activity is improving, as we understand that there are currently more ongoing negotiations for CapitaSpring which is slated to complete next year. The initial office supply pressure for 2022 has been dissipated due to construction delays, but which augured well for the office market as it provided more time for pre-leasing activities. The future supply that will spread over a longer time horizon allows demand and supply dynamics to recalibrate.”
Although there is a limited supply of new Grade A developments in the pipeline, CBRE Research expects that Grade A (Core CBD) occupancy will face further downward pressure in the early stages of 2021.
Chinese technology and non-bank financial services firms to fuel office rents recovery in 2021
Given Singapore’s political-neutral position and its introduction of new initiatives in terms of policy and tax structures, more Chinese technology firms are displaying strong appetite for expansion within the city.
Office demand in 2021 will also be fueled by non-bank financial services firms such as investment managers and hedge funds. To enforce Singapore’s position as a hub for investment funds, the Monetary Authority of Singapore launched the Variable Capital Companies framework in January 2020.
Office rents recovery on the cards
Through 2020, there was an increase in vacant stock as firms reduced their footprint upon renewal or relocation. A diverse range of industries, namely financial, insurance and technology, also contributed to the looming secondary space in the market.
This resulted in an increase in islandwide office vacancy from 4.5% in Q4 2019 to 6.0% in Q4 2020. With emerging vacancy in the market, there was downward pressure on Grade A (Core CBD) office rents. In Q4 2020, Grade A (Core CBD) office rents corrected for its fourth consecutive quarter, declining at 2.8% q-o-q to S$10.40 per square foot per month. This represented a full year decline of 10.0% in Grade A (Core CBD) office rents, which reversed the rental growth of 6.9% in 2019.
