Potential in suburban office space

This story was first published in The Straits Times on March 15, 2014

SUBURBIA may be the way to go when it comes to investing in offices.

As Singapore steps up the drive to decentralise, many office tenants have been moving away from the pricier city centre, Ms Christine Li, head of research at OrangeTee, observed in a report.

But as a result, the rental gap between central and fringe areas narrowed slightly, from a 14.4 price index gap in 2011 to 14.2 last year, she said.

She added that as mass-market residential home prices have moved ahead of office prices, there is room for fringe office prices to grow.

Following the end of the property trough in the second quarter of 2009 through to the fourth quarter last year, mass-market residential home prices shot up 73 per cent compared with fringe offices which have gained 53 per cent.

"It seems that fringe office prices are undervalued," she said.

She cited one-north in Buona Vista as an example of high-end, decentralised office premises.

"These buildings are new and are equipped with the latest technology, with attractive rental prices; that drew some tenants there."

With major tenants such as the Ministry of National Development and the Building and Construction Authority moving to JEM, suppliers of these government agencies may follow suit to be closer to them, she said.

"(The former) are considered quality tenants and their presence could enhance the property values in the vicinity, both in the residential and commercial segments."

Mr Alvin Teo, managing director of Sun Venture, which is developing Paya Lebar Square and owns Westgate Tower, said the potential of such outside central areas is in catering to many more SMEs for government agencies, and an even wider range of industries serving as suppliers.

"Westgate Tower caters to industries from medical and pharmaceutical, to shipping and the oil and gas industries, due to the accessibility to Jurong Health and Jurong Island respectively. The demand for pure office spaces from these industries has been strong due to accessibility and affordable options compared to the CBD," he said.

A spokesman for Neptune Orient Lines, scheduled to move from its current Alexandra Road office to The Metropolis at Buona Vista in May, said the firm chose it over CBD office spaces as "the office tower, which is within walking distance from the Buona Vista MRT station and surrounded by excellent recreational and retail amenities, is ideal for our needs".

NOL will be renting four floors at the Metropolis to house its corporate headquarters with 900 staff.

National Institute of Education's assistant professor in urban geography Diganta Kumar Das said decentralisation is not only efficient, but also achieves a more liveable community. "Not only does it bring jobs closer to home... people will also be saving more time when travelling to their offices," he said.

This story was first published in The Straits Times on March 15, 2014

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