High Pre-Leasing Might Benefit Singapore’s Office Rental Market
The recent high level of pre-leasing taking place in Singapore at the Paya Leber Quarter is something that might be very beneficial for the country’s office rental market, DBS has revealed. The DBS Group Research, while speaking about the recent events, showed that it is confident about the office rental market of Singapore and the fact that it will stay on a multi-year upturn even if the new supply is modest in the years to come.
DBS’s comments come after media reports that almost 80% of the Paya Lebar Quarter (PLQ) and about 70% of the Frasers Tower have already been pre-committed.
Reports have also revealed that the Great Eastern will also be leasing about 125,000 square feet of the space or about four floors of its Tower 3-13 story building at the PLQ. Previously, SMRT and CBRE both leased 97,000 square foot (about three floors) and 31,000 square foot (about one floor) of the space in the other tower. The new space at PLQ will be used by the insurance group for relocating some of its people at 200 Changi Road.
On the other hand, the story and news of leasing do not seem to stop in Singapore as previously, NTUC Income also leased 55,0000 square feet or 2 levels of the Tower 2 building. IWG was also reported to have had leased nearly 52,000 square feet in Tower 1 for the coworking concepts of the company.
Given the fact that NTUC Income, IWG and Great Eastern will be taking the reported space, the pre-commitment level might increase or jump to close to 80% from a previous 50% that was reported in the last year, said DBS. DBS, keeping everything in mind, then feels that all of this preleasing and subletting will benefit the Singaporean market to a huge extent. This is because more and more companies get facilitated and more and more are being purchased, which reflects well on the office market in Singapore as this means constant financial activity. The same sources and funds that are used to mobilize these deals can be used for another purchase, something that will benefit the economy greatly.
PLQ comprises over 800,000 square feet of Grade A office net lettable space and 340,000 square feet of retail space. It also has 429 residential units. All of its locations are also quite central and most of its buildings are located in places where there is constant activity and in commercial areas as well.
PLQ is also scheduled to be finished during the 3rd quarter of the year. According to Mervin Song, a well-known analyst, “We think that the high level of pre-commitment at PLQ shows that the demand for office rental space in Singapore is high especially that previously, there were concerns that PLQ might act as an overhang for the market”. Song also reiterated its stance on the overweight of office REITs.
Singapore’s office market will continue to thrive as long as there is constant activity and this is proof and evidence that big names are continuing to make purchases and this is something that will benefit the office market in the short and long run both.