Commercial property market heats up as Chevron House goes on sale

The 32-storey building with a five-storey retail podium and direct access to Raffles Place MRT station has 71 years left on its lease.
The 32-storey building with a five-storey retail podium and direct access to Raffles Place MRT station has 71 years left on its lease.PHOTO: ST FILE

SINGAPORE - The commercial property market is gathering steam with a unit of Germany's DekaBank Group putting Raffles Place building Chevron House for sale.

The 32-storey building with a five-storey retail podium and direct access to Raffles Place MRT station has 71 years left on its lease.

Property consultancies CBRE and JLL have been appointed to conduct an Expressions of Interest exercise for the office and retail building, which will be launched on August 2 and be closed on September 14.

The 29,891 sq ft site was completed in 1993 and has an overall occupancy rate of 98 per cent.

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Analysts think there could be potential for more investment office sales this year, exceeding last year's $6.49 billion.

Some investors led by Perennial Real Estate Holdings said on July 31 that they are considering a collective sale of AXA Tower for at least $1.65 billion. This works out to about $2,150 psf based on a total strata area of about 767,358 sq ft after renovation work, which will be completed in 2019.

Mr Jeremy Lake, CBRE's director of capital markets, said sentiment towards the office investment market has improved significantly in the last six to nine months, with more buyers than sellers.

"We expect to achieve in excess of $700 million which is very realistic and reflects a blended price of $2,700 psf on the total NLA of approximately 261,280 sq ft. The net yield at $700 million is estimated to be in the region of 3.6 per cent in the first year."

Mr Alan Cheong, senior director of research and consultancy at Savills, said the estimated asking price was "decent" and "reasonable" considering the exuberant market.

"There is no stock of investable grade office buildings in prime Central Business District locations," he added.

"Fortunately for sellers, the Government Land Sales programme has been more focused on non-CBD land locations, holding back on CBD land."

He said office rents have already turned upwards for Grade-A buildings, despite the higher vacancy rates. Mr Cheong said he did not believe that there was a correlation between vacancy rates and rents, as typically, higher vacancy rates would mean lower rent.

However, as developers are financially stronger and have been successful in getting substantial pre-commitments for new developments, they are more confident in raising rents, he added.