South Beach Tower at Beach Road has yet to open its doors to corporate tenants, but analysts have said it has already had an impact on office rents in the vicinity. Over the next 10 years, the Bugis-Beach Road office submarket could become a preferred choice of location for cost-conscious businesses.
The S$3 billion South Beach project has some 500,000 square feet of office space, and tenants are expected to start moving in next year. About 80 per cent of the space has already been leased at a monthly rental rate of S$9 to S$12 per square foot, according to the South Beach Consortium earlier this month. The South Beach project is a joint venture between City Developments and Malaysia’s IOI Group.
Knight Frank’s head of consultancy and research, Ms Alice Tan, said South Beach has helped to lift rents somewhat at other office buildings in the area. “For the last few quarters this year, we saw that rentals in the Suntec area have been creeping up to even beyond S$10 per square foot,” she said.
“One of the good-quality buildings in Beach Road is The Gateway – last year, rents were slightly below S$7 per square foot, as of this year, they were between S$7.20 and S$7.50. As for Bugis Junction Tower, which is right next to Bugis MRT station, rents are up to S$8 per square foot,” she added.
With another mixed-development project, Duo, expected to be completed in 2016, analysts said prospects for the Bugis-Beach Road area are looking up. Said Mr Ku Swee Yong, CEO of Century 21 Singapore: “Over the mid to long term, I believe the area around City Hall to Bugis MRT should have a lot of interest from commercial space users, partly because the transport infrastructure is undergoing a lot of revamp now.
“We will be seeing a new MRT line, and in probably another six to eight years, you will see the North-South Expressway also exiting from the Rochor area.”
Analysts added that the area could potentially prompt businesses keeping a tight eye on their budgets to consider moving from the Central Business District (CBD). According to Colliers International, monthly rents for premium grade office space in the Raffles Place and the new Downtown came in at S$11.67 per square foot in the third quarter, while Grade A offices went for S$10.25 per square foot.
Knight Frank said the anticipated increase in the working population in the Beach Road area will have a positive spillover effect on demand for retail and recreational amenities in the vicinity, and this could boost retail rents in the area in the next two to three years. However, an address in the CBD is still attractive, so Knight Frank said it expects more reshuffling activities there as landlords compete for lease renewals and new tenants.
Source : Channel NewsAsia – 29 Dec 2014