Published 14 April 2011
The Business Times
By Kalpana Rashiwala
Mapletree Business City clinches Nike, Deutsche Bank deals as businesses warm to space outside CBD
The CBD office leasing market in Singapore may have slowed in the first quarter, but things have certainly been active for business park space outside the city, where rents are comparatively lower.
Mapletree Business City (MBC), completed about a year ago along Pasir Panjang Road, has drawn Nike, which has leased 100,000 sq ft, and Deutsche Bank, which is taking around 120,000 sq ft. This means about 83 per cent of the development’s 1.73 million sq ft net lettable area (NLA) is now let. BT understands that landlord Mapletree Investments is mulling whether to bring forward plans to develop MBC’s second phase on the adjacent land currently occupied by The Comtech.
The Comtech and MBC are on an over one million sq ft site which has a single title and which formerly housed Alexandra Distripark, comprising five blocks. In 2003, Mapletree upgraded two blocks to The Comtech, which houses data centres of banks and technology companies, and later tore down the other three blocks and redeveloped that portion of the site to MBC.
Mapletree could wait for existing tenancy leases at The Comtech to expire in about two to three years’ time before it redevelops the site into modern business park space, BT understands. Market watchers suggest that the tenancy agreements would include a clause allowing Mapletree to take back the space early in the event of a redevelopment on the site.
Over at Changi Business Park, Credit Suisse recently inked a lease for 315,000 sq ft, with an option to take up a further 175,000 sq ft, at the One@Changi City project, which will be completed by Q4 2012. The bank will give up its space at One Raffles Quay and at two existing locations at Changi Business Park as the leases expire but will keep its premises at One Raffles Link primarily for front office employees, while retaining its data centre at Serangoon.
Says Colliers International executive director (office services) Calvin Yeo: ‘Following the previous CBD office rental peak in 2008, we started to see banks increasingly moving their secondary functions out to business parks.’
Besides MBC, options for occupiers looking for space outside the city include UE Bizhub East @ Changi Business Park, which will include a nine-storey business park component with about 423,000 sq ft of net lettable area slated for completion in second-half 2012. Next to Buona Vista MRT Station, Ho Bee is developing an office project that will have about 1 million sq ft of offices.
Urban Redevelopment Authority has also launched tenders for sites next to Jurong East and Paya Lebar MRT stations that will have minimum office components.
CB Richard Ellis executive director (office services) Moray Armstrong says: ‘Leasing activity for business park space and decentralised office space has undoubtedly increased in the past six months. This could be attributed in small part to the increase in CBD office rents. But it is also important to note that many occupiers may also be striving to achieve a long-term lower cost profile offered by business parks and decentralised offices.’
Market watchers say occupiers may also be drawn to the high quality of space at some outside-CBD projects; MBC’s specifications, for instance, match those of some new CBD office developments.
Leasing agents say consolidation from existing locations motivated by lower cost could be a factor driving some occupiers to lease space in business parks, while others are being driven by expansion of their activity in Singapore.
‘These secondary locations will also serve to meet crisis management plans by diversifying the locations of premises,’ says Colliers’s Mr Yeo.
Property agents say occupiers looking for a single floor can expect to pay an effective gross monthly rental of about $6-7 psf at MBC, compared with $12-13 psf for a new office development in the Raffles Place/Marina Bay area. The average monthly rental for grade A offices rose 22.2 per cent last year and a further 4 per cent (quarter on quarter) in Q1 2011, according to CBRE data.
However, occupiers are not allowed to house standalone marketing and other front-end type functions in business park space, which are supposed to be for ancillary, support and backoffice functions including processing and research and development, say property consultants.
At MBC, the space that Nike and Deutsche Bank are leasing is in a 17-storey business park block with floor plates of about 40,000 sq ft.
Deutsche Bank is understood to have leased three floors or 120,000 sq ft but not all of its space will kick in at once; rather the bank is expected to begin leasing the space in staggered fashion over a 12-month period as its leases expire in three other locations – DBS Tower 2, The Comtech and 991 Alexandra Road. In addition it has the option to take up a further floor at MBC, BT understands. The bank will retain its town presence at One Raffles Quay.
Nike is said to have leased 100,000 sq ft or two and a half floors at MBC, with an option for a further 20,000 sq ft. Nike is expected to move out of its current locations at Suntec City Tower 4 and Eightrium @ Changi Business Park when leases expire later this year. Nike’s space at MBC reflects an expansion of the space it is giving up in these two locations.
Among other things, the MBC premises will be used for Nike’s R&D and regional distribution as well as regional headquarter functions, BT understands.