Investor Interest Revving up Office Market


Signs of Recovery in Office Market

Singapore’s office market has experienced a sort of roller-coaster ride in the past 18 months due to the Covid-19 pandemic. At the end of 2020, most companies were assessing what the ‘new norm’ would look like post-Covid-19. For some companies, working from home was becoming a suitable model, for others, the traditional assembly of staff in the same physical location was still preferred. A movement of right-sizing began as companies, major banks in particular, looked to save costs by either giving up space that has been made redundant or relocating to more cost-effective premises. This led to the decline in office rents and prices throughout the whole of last year.

However, in early 2021, office rental declines began to ease as shown by the positive uptick of 3.3% q-o-q in the Q1 2021 URA rental index for Central Region. Based on rental data from the URA, the Q1 2021 median rent of quality office space in the Downtown Core and Orchard Planning Area rose to $9.80 psf from $8.80 psf in the previous quarter, while in the Fringe Area, the median rent rose to $5.63 psf from $3.94 psf over the same period.

The turnaround in the office market was due to increased leasing activity as some tenants were forced to vacate from older buildings which are slated to be redeveloped towards the end of the year, while some firms in the  technology, fintech and finance sectors took the opportunity to move to premium offices in the Downtown Core. The recovery could also be attributed to the Phase 3 reopening of the economy last December as well as a rebound in the Singapore economy. Singapore’s gross domestic product (GDP) registered its first year-on-year growth of 1.3% in Q1 2021 after three quarters of declines amid the COVID-19 pandemic on the back of strong manufacturing growth.

Examples of new tech giants who took up space in H1 2021 included TikTok/ByteDance who leased two floors (60,000 sq ft) at Guoco Tower, Tencent who set up its regional hub of some 10,000 sq ft in JustCo’s space at OCBC Centre East and Equinix who took up 80,000 q ft at 79 Robinson Road. From the legal sector, Clifford Chance would be moving to a whole floor of 25,000 sq ft at 79 Robinson Road. Hedge fund and financial services company, Citadel Enterprise has begun operations at its 30,000 sq ft office at Asia Square Tower 2, Capital International expanded its space in One Raffles Quay to 58,000 sq ft from 36,500sq ft previously while  Canadian pension fund OMERS has taken up 19,300 sq ft in the same building.

Co-working space also garnered a fair share of the market as more companies adopted a hybrid solution of combining conventional space with co-working space. For instance, Alibaba/Lazada has leased 135,000 sq ft of office space in 5OneCentral, comprising three floors or 90,000 sq ft of conventional office space and 35,000 sq ft of co-working space in the same building run by JustCo. It was announced in June that 5One Central has been renamed as Lazada One in honour of its new anchor tenant.

The shadow space created by the right-sizing exercise by some companies and banks have resulted in a wider choice for businesses which have been displaced or those who are looking to move to prime locations. With a continuous stream of leasing enquiries potential tenants, office landlords are not fretting over the space that has been given up.


Strata office space has always been a viable investment option for both local and foreign investors. These investors, mostly end-users such as family offices and small and medium-sized businesses, prefer strata office units to hedge against the risk of rising rents as well as for potential capital gains in view of land-scarce Singapore. Owners of strata offices have the option to become landlords when the economic climate favours an uptrend in rents. Moreover, unlike residential property, buying strata offices does not attract additional buyer’s stamp duty, which makes it an attractive investment option, particularly for foreign investors.

While there is no official statistics on the size of the strata office stock, industry players estimated it at 14 mil to 15 mil sq ft, which is less than 20% of the total office stock. Geographically, slightly over half of this space is located in the Downtown Core and Orchard Planning Area while about 40% is located at the Fringe Area.

The pick-up in strata office transactions could be attributed to rental recovery which in turn helped to firm up prices. Transaction data from URA shows that there were 153 strata office sales in H1 2021. At this rate, it could outdo the 211 transactions in the whole 2020 in the next six months. Based on the current sales momentum, the total sales volume could exceed 300, similar to that in 2017, 2018 and 2019. However, the average price of strata office in 2021 at $2,392 psf has already surpassed the price achieved in each of these years.

Several high-value deals were sealed in H1 2021. One of these was a 13,336 sq ft strata office on the 22nd floor of The Central that was sold for $41.7 mill or $3,130 psf in January. Over at Samsung Hub, a 13,100 sq ft strata office floor on the 11th storey of was sold for $49.78 mil or $3,800 psf in February. In May, property and construction group Lee Kim Taha clinched a similar sized office on the 9th storey for nearly $53.1 mil, achieving a record psf price of $4,050 for an office floor in the 999-year leasehold building in the Raffles Place financial district. In June, IMC Shipping, a private fund from Hongkong reportedly purchased a low floor unit in Suntec City Tower Two for $38.3 mil or $2,663 psf for 14,381 sq ft of strata area. In the same month, Suntec Reit sold six office floors in Suntec City to an entity linked to SilkRoad Property Partners for $197 mil. This price works out to $2,510 psf on a strata area of 78,491 sq ft encompassing a full floor in Tower One and five levels in Tower Two.

By end-June 2021, the total value of strata office deals stood at $656 mil, 9% higher than the $603 mil for the deals in 2020.



The AREAP Core 1 fund, a 50:50 joint venture between National Pension Service of Korea (NPS) and the Allianz group companies, acquired a 50% stake in OUE Bayfront from OUE C-REIT for S$633.75 mil in January 2021. This was based on an agreed asset value of $1.267 bn or $3,170 psf. US-based PGIM Real Estate bought 108 Robinson Road, formerly known as Finexis Building, for $143 mil or $2,608 psf based on a net lettable area of 54,832 sq ft. RBC Investor Services Trust Singapore – in its capacity as trustee of Certis and Lendlease Property Trust – acquired Certis Cisco Centre for $150 mil. The plan is to redevelop the ageing building on the 130,211 sq ft site into a green and sustainable development, optimising building technologies and digitalisation.

Maxwell House will soon be removed from the office stock as it has been acquired by the joint venture of Chip Eng Seng Corp, SingHaiyi Group and Chuan Investments for $276.8 mil. URA has given an outline advice to enhance the plot ratio from 4.3 to 5.6 and the new mixed-use development will have 20% of the total GFA zoned for commercial use and 80% for residential use.


The outlook for the office investment market is compelling for investors. The new norm for the office market is still evolving as employers continue to right-size their space requirements, adopting a hybrid model for employees to work from home and/or in the office. The trend of major banks trimming office space did not spell doom as a new mix of tenants from technology, media and real estate companies have been soaking up the space. Rents have started to rise again in Q1 2021 and prices are firming up in anticipation of the rental recovery.

Due to labour shortage, only two new office buildings are expected to be completed this year, namely Afro Asia iMark and CapitaSpring, both of which are held by institutional landlords. This makes the limited supply of office stock available for sale in the market all the more valuable to potential investors. The appetite for high quality or Grade A office buildings remained strong as word in the market is that a couple of major deals are already under way. These include the bidding process for One George Street which is already in progress and the sale of Twenty Anson Road via an expression of interest closing at end-July.


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