Guoco Midtown Shuns Anchor Tenant Strategy
SINGAPORE – Guoco Midtown’s office component is avoiding signing up an anchor tenant, in favour of leasing to different companies from various sectors, the majority of which have committed to occupy one floor each, according to a commentary published by The Business Times on Wednesday morning (8 February, SGT).
Guoco Midtown, a mixed-use development, contains a 30-storey office tower. Only 22 levels are occupied by office space, while the remaining 8 floors feature a car park, a sky garden, a jogging track, and other amenities. Office floor sizes there range between 29,500 sq ft and 30,400 sq ft.
So far, the largest tenant secured is Pacific International Lines (PIL). It has been learned that the shipping firm has agreed to lease 2.5 office floors collectively measuring 70,000 sq ft, a size that makes PIL a “mini anchor” tenant.
Other occupants that have signed up include reinsurer Swiss Re, Liechtenstein’s VP Bank, beverage maker Suntory, commodities trader Vitol, oil company ConocoPhillips, German chemical company BASF, pharmaceutical firm Boehringer Ingelheim, and Chinese game developer NetEase Interactive Entertainment.
Instead of having several major anchor tenants, Guoco Midtown’s main office tower has attracted various companies from different industries. Such a leasing strategy is not common among builders of office towers in Singapore. Usually, they secure several blue-chip firms to jump-start the office rental activity.
Such a strategy is not typical among developers of office buildings in Singapore. Typically, the goal is to clinch a few big-name anchor tenants to kick-start leasing activity, such is the case with IOI Central Boulevard Towers, which signed up Amazon as an anchor tenant in 2022.
By avoiding having major anchor tenants Guoco Midtown’s office building should be able to record a higher weighted average office rental rate, as Super anchor tenants tend to “suck out a lot of the rental value of a building” as they tend to ask for hefty rental discounts, commented a veteran office market watcher, who requested anonymity.
Large anchor tenants also try to negotiate for rights to relinquish some office space at stipulated points of the lease duration, like after the 3rd year of a five-year or longer lease.
There is also a risk of eventually facing a huge vacancy if a major anchor tenant leaves. This does not only happen during economic crises, but can also happen if the anchor tenant changes its plans. For example, in the past, some fast-expanding tech companies have decided to buy their own office tower.
Meanwhile, The Business Times understands that monthly effective office rents at Guoco Midtown range from about S$11 psf to over S$13 psf.
“The office rents achieved in Guoco Midtown are in line with recent leasing transactions for comparable buildings in the locale, that is, Duo Tower and South Beach Tower,” added Colliers’ Executive Director & Head of tenant representation in Singapore June Chua.