Commercial landlords in Singapore are now fighting just to keep their prized tenants. Some owners of buildings on Raffles Place say that they even offer single-figure rental rates.
According to several industry sources, flats with below $10 per square foot lease are popping out on list to renegotiate on buildings like Equity Plaza and OUB Centre. Leaseholders in Singapore Land Tower say that they are now receiving offers at $7 per square foot.
Such amazing rents at the heart of financial district are very rare during the property boost, but consolidated firms are holding back after the global economic crisis broke and office demands had “weakened considerably”, says DTZ on its report on 01 April.
Additionally, “more shadow space is emerging as companies scale down their workspace and sublease excess space” and this effect may continue, it added.
During the end of 2008, average monthly lease for Grade-A spaces was $15 per square foot, which fell by 18 percent to $12.30 per square foot by the end of March 2009, says CB Richard Ellis. On the same period, average monthly lease for prime office spaces also dropped by 19 percent to $10.50 per square foot.
“Competition to retain tenants is on”, says Donald Han, the managing director of Cushman & Wakefield Singapore.
Several commercial landlords came up with a response when they were asked regarding the building rentals; one of which was CapitaCommercial Trust (CCT) who owns properties like Six Battery Road. It said that they still sign a double-digit rent for their Grade-A offices
Spokeswoman from Keppel Land said that “single-digit rental rates for some buildings and double-digits for others” were still observed across K-Reit Asia and Keppel Land’s office portfolios, including Equity Plaza and One Raffles Quay.
Some industry observers also believe that only few existing tenants are benefited with these rates. These are the firms renting large spaces with long year leases of firms with excellent corporate profiles.
Still, the low rate scheme is jeopardising new projects, which may draw tenants away. New project will now have to propose good deals in convincing companies to rent their buildings.
The Cushman & Wakefield Singapore will open an approximate 2.4 million square feet of office spaces in 2009. Project taking place include Marina Bay Financial Centre, which the Keppel Land is now developing along with Cheung Kong (Holdings)/Hutchison Whampoa and Hongkong Land.
There are also talks about the rent of the upcoming new Straits Trading Building right beside Singapore Land Tower. It attained single-digit levels, but reports on January last year said that the building could still fetch a rent of up to $18 per square foot.
The 28-storey building is expected to have a temporary occupation permit (TOP) by November and 25 percent of the space are now pre-committed. According to them, the rent ranges from $10 to $12 per square foot will depend on the agreement.
Also, landlords are now giving other incentives to retain their tenants. “We start to see more creative packaging of deals”, says director of business space for Agnes Tay, Knight Frank. “Some deals can involve a higher transaction price but include more rent-free months to bring down the average cost”, he added.