SINGAPORE OFFICE REPORT

3Q10
ECONOMY BEAT ON THE STREET
“In the coming months, companies
Singapore’s recession is long over - the Singapore economy grew 18.8% 18 in 2Q 2010,
resulting in official estimates for the growth in 2010 to be raised for the third time by should remain keen in securing space
the Ministry of Trade and Industry (MTI). As of August, the MTI expected Singapore’s while rents are still attractive. Companies
economy to grow by 13% to 15% for the whole of 2010. However, it is unlikely that whose leases are expiring should also be
economic forecast will be further raised. While overall economic sentiments remain keen to secure newer and larger space to
positive, it is increasingly cautious in light of wider risks from the European sovereign
debt crisis and a possible double dip in the U.S. economy. Advanced estimates by cater for expansion. ” – Adrian Toh,
MTI also showed the economy grew 10.3% in 3Q10, a healthy but slowed economic Associate Director of Commercial
growth. The Consensus Economics predicted that the Singapore economy will grow Transactions Services, Singapore.
by 14% in 2010 and 5% in 2011.
ECONOMIC INDICATORS
2009 2010F 2011F
OVERVIEW
GDP Growth -1.3% 14% 5.0%
The Singapore office market gathered the best momentum in 3Q10 10, since the last CPI Growth 0.6% 2.5% 2.0%
economic recession from 2H 2008. The rental recovery, led by prime office space, has
developed from encouraging signs of turnaround in 2Q10 to a certainty in 3Q 10. Unemployment 2.3% 2.2% -
Meanwhile, this recovery in 3Q 10 is incremental, judging from a moderate overall qoq SIBOR 0.69% 0.50% -
increase of 6.4% for prime offices. Compared to 1H 07 where prime office rents
escalated by at least 15% per quarter, this recovery seems encouraging and
sustainable. Source: Ministry of Trade & Industry, Monetary
Authority of Singapore, IMA Asia
The rental recovery was driven by rapid corporate expansions, particularly MARKET FORECAST
international firms which are either swelling with new business units or setting up
regional headquarters in Singapore. For example, Julius Baer, the Swiss private bank, ABSORPTON: Estimated positive
is setting up a dual head office in Singapore as part of a drive to make Asia its second
home and has pre-committed space at Asia Square Tower 1. Given rents are way net absorption averaging about
attractive compared to the peak in 2007, this encouraged several financial institutions 500,000 sq ft per quarter in 4Q10 to
to pre-commit in prime office projects which are undergoing construction.
construction For 1Q11 as companies actively pre-
example, DBS has announced plans to spend $1.5 billion, 80% of which will be on commit for expansions.
office rental, for the next 10 years, while Maybank opened an Islamic banking hub in
Singapore. With the race for prime office space, prime office vacancy fell by 1.1 CONSTRUCTION: Limited office
percentage points in 3Q 10 so that occupancies rose from 95.7% in 2Q10 2 to 96.8% in constructions as hardly any new office
3Q10. For the first 3 quarters of 2010, occupancy of prime office space grew by 4.2%, development plans were made in
underpinned by a significant rise in demand, amid substantial new supply.
supply 2008 and 2009.
The recovery in the office property market went beyond an increased occupier RENTAL RATES: Rents expected
demand. The quarter saw major office en bloc deals – DBS Towers 1&2 1 sold for about to increase by about 5% per quarter in
$980 psf and Chevron House, sold for about $2,083 psf, reflecting investor interest for
4Q10 and 1H11.
prime office buildings while prices are still attractive. Nevertheless, the building was
purchased for $2,780 psf of NLA by Goldman Sachs in 2007.
GRADE A OVERALL RENTAL VS.
VACANCY RATES
OUTLOOK
S$/sq ft/mth

18 9%

From 4Q10 to 1H11, office rents are expected to continue to rise by about 5% per 16 8%

quarter, driven by corporate expansions. Companies are enthusiastic in expansion 14 7%

plans, particularly as this is still the early to mid-stage of a confirmed economic 12 6%

recovery and overall business costs are attractive. On one hand, demand for prime 10 5%

office space will be strong but new potential supply remains limited as the lacklustre 8 4%

years in 2008 and 2009 saw limited office development plans kicked off.
off 6 3%

4 2%

The recovery in office space demand is expected to be broad-based,

broad as both 2 1%

international companies and smaller firms are expanding. This will provide support for 0 0%

rents of suburban office space to grow by at least 3% qoq in 4Q 10 to 1H 11. 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10

Rent Vacancy

1 SINGAPORE OFFICE REPORT 3Q10

 SINGAPORE OFFICE REPORT 3Q10

MARKET / SUBMARKET RENTAL STATISTICS

OVERALL YTD YTD

VACANCY UNDER CONSTRUCTION OVERALL GRADE A RENTAL RATE*

MARKET/ SUBMARKET INVENTORY RATE CONSTRUCTION COMPLETIONS ABSORPTION Local Currency Euro US $

Overall Grade A (including Orchard

Road) 25,291,399 3.2% 753,903 630,765 471,200 7.70 4.27 4.87

Overall Grade A (excluding Orchard

Road) 22,730,726 3.5% 704,712 630,765 457,200 8.19 4.54 5.28

Raffles Place (Grade A) 10,045,378 2.3% 704,712 630,765 428,000 8.50 4.72 5.48

Shenton Way (Grade A) 6,777,993 6.7% 0 0 1,200 6.51 3.61 4.20

City Hall/Marina Centre (Grade A) 5,907,355 2.1% 0 0 28,000 7.55 4.19 4.87

Orchard Road (Grade A) 2,560,673 2.8% 49,191 0 14,000 7.22 4.29 4.65

*Rents in local currency, SGD psf per month

Source: Cushman & Wakefield Research

MARKET HIGHLIGHTS

SIGNIFICANT 3Q10 NEW LEASE TRANSACTIONS

BUILDING SUBM ARKET TENANT EST SQ. FT BLDG CLASS
Asia Square Tower 1 Central Business District Citibank 200,000 A
Marina Bay Financial Centre Tower 3 Central Business District Clifford Chance 20,000 A
Mapletree Anson Central Business District Yahoo! 40,000 A
SIGNIFICANT 3Q10 INVESTMENT SALE TRANSACTIONS
BUILDING SUBM ARKET Buyer SQ. FT PURCHASE PRICE
DBS Towers 1 and 2 Central Business District Overseas Union Enterprise 883,000 $870,500,000
Chevron House Central Business District Deka Immobillien 262,650 $547,000,000
SIGNIFICANT 3Q10 CONSTRUCTION COMPLETIONS
BUILDING SUBM ARKET M AJOR TENANT EST SQ. FT COM PLETION DATE
Marina Bay Financial Centre Tower 2 Central Business District Barclays Capital 350,000 3Q10
SIGNIFICANT PROJECTS UNDER CONSTRUCTION
BUILDING SUBM ARKET KNOWN TENANT EST SQ. FT COM PLETION DATE
50 Collyer Quay Collyer Quay Bank of America (100,000 sf) 420,000 1Q11
Ocean Financial Centre Raffles Place ANZ Bank (200,000 sf) 850,000 2Q11

Source: Cushman & Wakefield Research

FOR INDUSTRY-LEADING
LEADING INTELLIGENCE TO SUPPORT YOUR REAL ESTATE AND BUSINESS DECISIONS, GO TO CUSHMAN & WAKEFIELD’S KNOWLEDGE CENTER
CENT AT: www.cushmanwakefield.com/knowledge
*Market terms & definitions based on BOMA and NAIOP standards.

This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete.
Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the
accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price,
p rental or other conditions,
withdrawal without notice, and to any special listing conditions imposed by our principals. Cushman & Wakefield Singapore
©2010 Cushman & Wakefield, Inc. All rights reserved. 3 Church Street,
Samsung Hub #09-03
Please consider your environmental responsibility before printing this report. Singapore 049483
(65) 6232 0873
2