[SINGAPORE] Even in its infancy, Marina Bay, the new growth area slated to be the new extension of the traditional CBD, has achieved much success both in terms of leasing rates and return on investment.
Figures compiled by CBRE show that while more than $7.5 billion has been invested in Marina Bay by the government to date, more than $6.2 billion has been received by URA from the sale of land parcels (which so far constitute about 20 per cent of the available stock).
There has also been more than $25 billion of local and foreign equity pumped into developments in the area.
"Notwithstanding the indirect contributions to the state's GDP and employment creation, Marina Bay looks to be one of the most lucrative investments ever," said CBRE in its special report.
Marina Bay is expected to deliver potentially 30.4 million sq ft of office space when fully developed. In addition to the traditional central business district (CBD), which yields about 21.6 million sq ft of office space, Singapore's office space is expected to more than double to 52 million sq ft over the next 20-25 years, said Moray Armstrong, executive director of office services at CBRE.
To date, the six office towers (totalling 5.5 million square feet) in Marina Bay enjoy an average pre-lease commitment level upon completion of 82 per cent.
"This is an extraordinary leasing performance by any global comparison, especially with four out of the six towers essentially 100 per cent pre-let upon completion," said CBRE.
Noted Mr Armstrong: "Demand for office space has been surprisingly robust . . . These types of buildings have really caught the eye of multinationals (MNCs)."
Taking floor plate size as a benchmark, there are at least 14 office developments in the CBD that can offer floor plates of more than 20,000 sq ft, with three more in the pipeline. These buildings can offer approximately 13.5 million sq ft of large column-free contiguous space. Of these 14 developments, more than half are located in Marina Bay.
"Typical CBD floor plates range from 8,000-12,000 sq ft (and) many of the bigger occupiers have outgrown this. If you're an investment bank leasing 300,000 sq ft, you want to be spread over a maximum of eight to 10 floors. Hence, many of them have moved," said Mr Armstrong.
It's no surprise then that occupiers from the financial sector dominate, taking up approximately 65 per cent of the occupied space.
"The banks were the first to lead the charge into Marina Bay. But the make-up has been changing. The proportion of financial institutions in Marina Bay has shrunk, from 80 to 65 per cent, and the key reason for that is there has been a stronger take-up of late by complementary industries," he noted.
CBRE said that occupier demand from law firms within Marina Bay has grown significantly over the last 10 years, by more than 170 per cent from 2004 to 2012. Commodity companies, such as BHP and Rio Tinto, have recently established regional head offices in Marina Bay Financial Centre (MBFC).
Legal firms now account for the second-biggest occupier share at 8 per cent. The information technology sector made up 6 per cent, while commodities and insurance firms both recorded 5 per cent.
That said, the concern over the hollowing out of the traditional CBD with the new buildings at Marina Bay coming on board has not come to pass, said Mr Armstrong.
"If you are a service provider, buildings with floor plates of 8,000-12,000 sq ft are quite attractive. So while the bigger investment and consumer banks have moved on, the space (in the traditional CBD) has been filled by growth in the services sector."
The emergence of the new buildings in Marina Bay has upped the ante in terms of building specifications particularly for older buildings in the traditional CBD area, noted Desmond Sim, associate director, CBRE Research.
To that end, several older office developments, including 71 Robinson Road, Ocean Financial Centre, and One Raffles Place Tower 2, have been recently redeveloped.
Interestingly enough, rents in the CBD and Marina Bay are on a par, with Grade A rents averaging $10 psf, said Mr Armstrong.
"This is partly because there were two new buildings that came online - MBFC Tower 3 and Asia Square - so it's been a little more competitive of late.
"This is a really good opportunity for occupiers because you can get quality space (at Marina Bay) at essentially the same rents you would pay, in many cases for older buildings, in the CBD. I think this should last over the next six to 12 months."
Residential developments in the CBD, too, have expanded. From 2007, the stock has doubled, with 2,360 residential units added to the market. Currently, there are between 3,000 and 3,500 residential apartments in the CBD.
"Developers have obviously seen a gap in terms of living space, probably buoyed by the success of the condominiums here, and this has spurred them into action, to redevelop a number of older obsolete office buildings," said Mr Armstrong.
"V on Shenton is the next residential opportunity, and sales have been robust."
Upcoming projects, including Cecil Suites (272 units), Marina One (1,006 units), and a residential development at what used to be Chow House (128 units), are expected to launch between the second half of this year and 2014.
Source: Business Times
