Can Singapore’s office real estate compete with the likes of Hong Kong and Tokyo? (Image courtesy of Singapore Tourism Board)
The Lure of Real Estate
In the battle to attract international business and investment, Singapore Prime Minister Lee Hsien Loong addressed the core issue that countries “cannot stay static, or else the country will stagnate and decline.” While there are, of course, many factors in determining where a multinational business or corporation (MNC) bases its operations –- and Singapore’s strategic geo-political location, rule of law, and governmental incentives already make the city-state attractive –- the availability and nature of a country’s commercial real estate is economically and strategically important.
Singapore is in direct competition with Asia’s other regional financial hubs of Hong Kong, Shanghai and Tokyo, and globally with established centres such as London and New York, to attract global multinationals. When MNCs, especially in fields such as finance and banking, decide where to locate their businesses, the type, size and location of the commercial real estate there are critical considerations.
What do MNCs Want?
Global commercial real estate and investment specialist Jones Lang LaSalle identified in its 2010 white paper Future Proofing the Office Market certain key requirements in commercial real estate that major occupiers look for, including large-scale, of 20,000-square feet and upwards, floor plate size; regular, rectangular or square design; and Green Mark Certification, showing the building’s environmental credentials.
Multinationals look for office space with large, column-free square, regular-shaped floor plates because, says Jeremy Choy, project director at Asia Square, Singapore’s most ambitious commercial development to date, it is highly efficient. The layout allows the maximum use of space, and accommodates more personnel for the same floor area present in one area, which means that the tenant has to rent less floors, which all translates into lower cost of occupancy. This also increases employee productivity, as departments that are spread over multiple floors tend to communicate less and spend less time in face-to-face interactions.
Grade-A in Singapore
An artist’s impression of Asia Square. The development’s massive floor plate size is a key factor in attracting financial institutions to Singapore. (Image courtesy of MGPA.)
Until recently, what grade-A real estate existed in Singapore, like Raffles Quay, was limited. The Singaporean government, however, has spearheaded a drive to promote office developments with larger floor plates. The result has seen buildings like Asia Square, which has attracted tenants such as Citibank, Julius Baer, Lloyd’s, and Google, amongst others, with its 35,000-sqft, column-free, rectangular regular shape floor plates, or Marina Bay Financial Centre, which hosts Standard Chartered Bank and Societe Generale on floor plates of approximately 21,000-sqft, both attracting major banking, finance and service institutions.
The World’s Commercial Hubs
While London and New York, which have between them roughly 50% of the world’s 20,000+ sqft floor plate space, remain unchallenged in terms of real estate capacity, Singapore alone amongst the Asian hubs has the faculty to develop its CBD in the future. Hong Kong and Tokyo are both at saturation point; Hong Kong in particular has resorted to building grade-A real estate in outlying Kowloon to accommodate demand. Singapore, however, has set 100 hectares aside of its downtown Gardens by the Bay and Marina Promenade developments, giving it the unique opportunity to bring on to the market around seven million sq ft of office space in the next five years.
Gardens by the Bay offers multinationals grade-A real estate in the heart of the CBD. (Image courtesy of Singapore Tourism Board)
Rent
Rental rates in the CBD, predicts Chris Archibold, international director and head of markets at Jones Lang LaSalle, will see moderate quarterly increases in the first half of 2011, with faster increases in the second half and for much of 2012. Yet, Archibold argues, locating to the CBD is essential for some companies, particularly banking or financial institutions, which will pay the rent regardless, driven by market demands for the prestige a CBD-business address brings, as well as business requirements for (and the company’s senior executives’ desire to work in) a central location.
Different Strokes
Yet these buildings only really make sense for large-scale companies, as a certain size is required, Choy estimates around 30,000-sqft, before economies of scale come into play. Other locations are available for small to medium sized companies, or those that don’t require the status that comes with a CBD office address. Changi Business Park, for example, attracts high tech, data and software businesses, as well as R&D divisions of companies.
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