Alexandra Technopark Vacancy To Rise By 15% Due To Google’s Downsizing
SINGAPORE – DBS Group Research said that after Google surrenders a part of the space it’s occupying at Alexandra Technopark on 20 February 2024, the business park’s vacancy level will climb by 15 percent, reported The Edge on Thursday noon (23 February, SGT).
“Although this is a significant vacancy risk for the property, we believe that given the ample notice of a year away, FLCT will be able to backfill some of the space to be vacated,” stated DBS in a research note published on Thursday.
“Moreover, new leases signed could generate some positive rent reversions given that Google probably pays a relatively favourable rent as they currently occupy such a large space at ATP of around 450,000 sq ft.”
Notably, the search giant occupies 40 percent of the space at Alexandra Technopark under a 5-year lease that took effect in January 2020. While it leased space at the business park to cater to possible expansion, Google’s staff largely do their work at the neighbouring Mapletree Business City and the company’s space at Alexandra Technopark remains vacant.
If Frasers Logistics & Commercial Trust (FLCT) fails to lease the space to be given up by Google, the real estate investment trust’s (REIT) distribution per unit (DPU) is expected to dip by 0.9 percent for FY2024.
However, the more important question is whether Google will renew the remaining space at Alexandra Technopark upon expiry in December 2024, given that the search giant has recently extended its lease at Mapletree Business City.
“We believe there is a risk of Google not renewing its lease at [the business park] as it continues to rationalise and consolidate its office space,” reckoned DBS.
If the search giant doesn’t renew its entire lease at Alexandra Technopark, FLCT’s DPU for FY2025 and FY2026 could drop by between 3.5 percent and 4 percent.
“We will be keeping a close eye on this lease and will provide further updates once available,” added DBS.