Singapore Office: Amazing Amazon
- Upcoming Central Boulevard turning into a CBD tech hub with Amazon could potentially be its first an anchor tenant
- Other tech giants like Meta and ByteDance are also exploring options at Central Boulevard
- Average rents expected to range between S$12psf and S$14psf, implying signing rents could be close to all-time high office rents
- Strong demand on tight office supply is the perfect concoction to drive rents up!
What’s New
Amazon in advanced negotiations to lease c.350k sqft or more at upcoming Central Boulevard; c.30% pre-committed if signed. Tech giants are making headlines again in the Singapore office market. Business Times just reported this morning, 20 May 2022, that Amazon is in advanced talks to lease offices at IOI Properties’ upcoming Central Boulevard.
It is understood that Amazon could be looking for c.350k sqft or more of office space at Central Boulevard. If the lease is signed, Central Boulevard will be c.30% pre-committed.
Amazon is currently leasing at three office buildings – One George St (45k sqft), Capital Square (80k sqft), and Asia Square Tower 1 (100k sqft), and is occupying space at the WeWork facility in Manulife Tower on Cross Street.
According to the article, Amazon may consolidate some of the office space from the two older buildings, One George St and Capital Square, and maintain its location at Asia Square Tower 1.
Average rents of S$12psf to S$14psf imply signing rents could be close to all-time high office rents of S$12psf to S$19psf. According to the article, IOI Properties is targeting to achieve an average monthly gross effective rent of about S$12psf to S$14psf. If successful, we see this as another positive datapoint for Singapore offices, as it implies that office rents can only go up in the near term. Average rents are at the high end of office rents, and signing rents are probably close to all-time high office rents of S$12psf to S$19psf. This would be a strong testament to the positive outlook on the Singapore office sector.
Tech giants are still expanding or may consider consolidating office locations. The news article also mentioned other prospective tech giants, Facebook parent Meta and ByteDance, which are also considering Central Boulevard.
Meta is currently leasing about 500k sqft at Marina One and 100k sqft at South Beach Tower (City Developments). ByteDance is currently leasing c.130k sqft at One Raffles Quay “ORQ” (Keppel REIT “KREIT”), occupies more flexible space (operated by The Executive Centre) at ORQ, and also c.100k sqft at Guoco Tower (Guocoland). ByteDance was previously reported to be negotiating to takeover JP Morgan’s previous office location at Capital Tower (Capitaland Integrated Commercial Trust “CICT”) of c.130k sqft.
The tech giants may consider consolidating their office footprints into one or a few buildings, as the upcoming Central Boulevard, with 1.3m sqft of space, is probably one of the few locations able to provide large office space options to these tech giants. However, it is understood that there could be link bridges connecting Asia Square and ORQ that may encourage them to keep their office spaces at these two buildings.
A perfect concoction to drive office rents higher – upcoming new supply slowly filling up with strong demand. Central Boulevard progressing with pre-commitments two years ahead of its completion (expected in 3Q2023) and, as we understand it, Guoco Midtown (expected to be completed by end-2022) finding a potential anchor tenant, imply strong demand is soaking up new supply at a faster-than-expected pace. It appears that tight supply will remain and core CBD vacancies will likely trend below 4%. This is the perfect concoction to drive rents higher and higher.
We remain positive on Singapore offices; top picks are CICT and KREIT. We just published our Singapore REITs 2H2022 outlook today, Singapore REITs: Bank with the winners, and reiterate our positive stance on Singapore offices. Aside from tech giants, we believe office demand from other sectors is recovering, led by corporate expansionary needs and regional office relocations into Singapore (such as from Hong Kong). Our top picks in the sector are CICT and KREIT.