‘Green’ prime office space baits top tenants

PLAYING the green card might just be the perfect carrot for Singapore office landlords to dangle in front of top-tier occupants to draw them away from popular Asian financial hubs such as Hong Kong.

Toby Dodd, country manager for Cushman & Wakefield, Singapore, said: “Singapore has a distinct advantage over Hong Kong in that it is viewed as a pioneer in terms of environmental consciousness by incorporating green planning in mega-building structures.”

Furthermore, being the only Asian city to have been ranked “well above average” by the Economist Intelligence Unit’s (EIU) Asian Green City Index, Singapore seems well-poised to opportune on the mounting concerns surrounding Hong Kong’s rising pollution levels.

In fact, according to a poll by think-tank Civic Exchange last December, one in four Hong Kong residents are already considering the option of emigrating to escape from the city’s deteriorating air quality.

“Air pollution does make a difference, particularly in industries such as banking where there are similar jobs in cities like Singapore where the air quality is better and the government is actively pushing the country’s green credentials,” noted Mr Dodd.

As at September 2011, around 470 buildings in Singapore already bear the Building and Construction Authority’s (BCA’s) Green Mark certification – a benchmarking scheme which incorporates internationally recognised best practices in environmental design and performance – and this number is set to grow further as green building features gain recognition for their ability to boost an asset’s attractiveness to increasingly socially responsible corporate tenants, especially in the realm of Grade A office properties located in the central business district (CBD).

The latest building to join the pipeline of green developments in Singapore’s CBD is CapitaLand’s CapitaGreen, a 40-storey office tower to be built on the site of the former Market Street Carpark.

Boasting lush greenery that would deck more than half of the building’s facade alongside other green features, the development is primed to be the CBD’s “greenest” building when completed in 2014 and is expected to draw rents of $12 to $14 per square foot (psf) per month.

Another factor pushing tenants away from Hong Kong and towards Singapore is the former’s increasingly exorbitant rents.

At sixth place, Singapore’s CBD is ranked five steps behind Hong Kong’s CBD – ranked first – in terms of total occupancy costs in Asia-Pacific, making Singapore a much more palatable option. This translates to rents being 38.5 per cent cheaper in Singapore as compared to Hong Kong.

“Singapore is globally renowned for its enviable quality of life, and coupled with a steady stream of prime office space coming to the market it is clear that it has an advantage over Hong Kong in attracting tenants . . . For growing companies who are looking to expand their business to the Asia-Pacific region, Singapore is also the obvious choice, with a better choice of stock and without getting burnt by prohibitively high rents,” said Mr Dodd.

Singapore’s CBD is also the fourth fastest in the world in terms of rental growth at 24.39 per cent, trailing Beijing (75.3 per cent), Moscow (41.18 per cent) and Shanghai (27.37 per cent) respectively, on the back of Singapore’s continuing economic growth, though rents have yet to reach the highs recorded in 2008, said Cushman & Wakefield.

Looking ahead, global economic growth should be led by Asia, with Singapore well-positioned within the region to benefit.

However, Mr Dodd cautioned that the “growth velocity” of firms continues to remain unclear, making expansion decisions a “challenging” task.

Expecting the outcome of the first-quarter reporting season to set the growth tone for the year, Mr Dodd would rather adopt a cautious stance towards Singapore’s office space outlook for now.

“We are not overly aggressive or confident about Singapore’s office demand. But if there’s growth, Singapore can accommodate it with plenty of good office space and rents well below the peak. It’s all about the ability to accommodate growth which would lead to further economic growth,” he said.

The Business Times – February 18, 2012