WeWork leasing 21-storey tower in CBD

The WeWork City House in Robinson Road. WeWork, the US co-working giant, has locations in over 28 countries, including Singapore, China and India. The 21-storey tower in Collyer Quay will be its biggest property in Singapore and has a net lettable ar
The WeWork City House in Robinson Road. WeWork, the US co-working giant, has locations in over 28 countries, including Singapore, China and India. The 21-storey tower in Collyer Quay will be its biggest property in Singapore and has a net lettable area of about 200,000 square feet.PHOTO: COURTESY OF WEWORK

CapitaLand Commercial Trust (CCT) will lease out 21 Collyer Quay - a 21-storey building in Singapore's financial district currently occupied by HSBC - to United States co-working giant WeWork.

The move marks WeWork's expansion in Asia. The tower will be its biggest property in Singapore and has a net lettable area of about 200,000 square feet.

The lease with WeWork will start in the second quarter of 2021 for a period of seven years, said CCT, without disclosing financial details of the new deal.

CCT's lease deal with Hongkong and Shanghai Banking Corp, a unit of HSBC Holdings, will end in April next year.

It said the agreement with WeWork is not expected to have a material impact on net asset value per unit or distribution per unit for the current financial year ending Dec 31.

CCT also said it plans to capitalise on the transitional occupancy downtime during the change-over of tenants to upgrade the building.

It added that the expected return on investment is approximately 9 per cent on an estimated cost of $45 million to upgrade the property.

The building is valued at $462.2 million as of June 30.

  • 4%

    Percentage of office space in the Central Business District that is taken up by flexible workspaces, according to real estate consultancy Colliers.

Co-working spaces have become popular among start-ups because they offer the flexibility of short-term leases in well-decorated spaces and keep overheads low. Increasingly, larger companies are also using co-working firms to manage their offices.

In Singapore, the flexible workspace footprint has more than tripled since 2015 and now accounts for some 4 per cent of office space in the Central Business District (CBD), according to real estate consultancy Colliers.

WeWork's new lease will give it rare signage rights in the country's financial district, said Ms Christine Li, head of Singapore and South-east Asia research at property services firm Cushman & Wakefield.

"It's a very good catch for WeWork," she said, adding that this is because, in most cases, only a few floors are available in the business district due to low vacancy.

WeWork will occupy 20 floors of the building, the US firm said in a separate statement, but did not provide any details about the remaining floor.

HSBC Singapore said last year that it would relocate its head office to Marina Bay Financial Centre within the CBD.

Rents for grade A buildings in Singapore's CBD surged 12.7 per cent last year, Ms Li said.

She expects rents to stay mostly flat this year at the current level of about $10.61 per sq ft per month, due to a slowing economy and uncertainties from trade tensions between the US and China.

Founded less than a decade ago, WeWork has locations in more than 28 countries, including Singapore, China and India.

The co-working giant - which is losing money but has filed paperwork for an initial public offering - has faced questions about the sustainability of its business model, which is based on short-term revenue agreements and long-term loan liabilities.

Separately, CCT said yesterday that it will acquire an effective 94.9 per cent interest in the holding companies of a freehold office building in Frankfurt, Germany, from its sponsor CapitaLand and mainboard-listed property and construction group Lum Chang Holdings.

The purchase consideration will be €133.4 million (S$205.3 million), the manager of the real estate investment trust said.

The property, Main Airport Centre, is a multi-tenanted office building located close to Frankfurt Airport and a 20-minute drive from Frankfurt's central business district.

This purchase, as well as higher revenue from its other properties, lifted CCT's distribution per unit for the second quarter by 1.9 per cent to 2.2 cents, from 2.16 cents a year ago.

Its results released yesterday also showed that net property income for the quarter ended June 30 grew 0.8 per cent to $78.4 million, from $77.7 million a year ago.

Gross revenue, meanwhile, was up 3 per cent to $101 million from $98 million a year ago.

Distributable income, meanwhile, was up 3.8 per cent to $82.4 million from $79.4 million a year ago, due to lower borrowings and higher distribution of tax-exempt income of $3.9 million.

REUTERS, THE BUSINESS TIMES

A version of this article appeared in the print edition of The Straits Times on July 18, 2019, with the headline 'WeWork leasing 21-storey tower in CBD'. Subscribe