Hongkong Land Holdings Ltd., which owns a stake in the biggest developer of Singapore’s new financial center, will seek more commercial plots in the island-state as tenants seek to upgrade to new buildings.
Hongkong Land, part of a venture with Cheung Kong Holdings Ltd. and Keppel Land Ltd., will evaluate land purchases in Singapore’s prime office areas when the government puts them on sale, Executive Director Robert Garman said. The venture built the key development in the new business district, Marina Bay Financial Centre, for about S$4.5 billion ($3.5 billion).
Global banks such as Standard Chartered Plc and Macquarie Group Ltd. upgraded their Singapore offices to new locations developed by Hongkong Land and its partners, while Barclays Plc and Nomura Holdings Inc. have relocated regional and global functions to Singapore, ranked the easiest place to do business for seven straight years by the World Bank. Monthly prime office rents rose 4.2 percent in the June quarter from the previous three months, according to Cushman & Wakefield Inc.
“We are confident of the Singapore office market,” Garman said in an interview in Singapore on Sept. 4. “There are still multinational companies that remain in older properties so one can argue that there is sufficient demand that can be absorbed in this new district.”
The island-state’s move to open up its financial sector after the 1997 Asian financial crisis has helped boost demand for office space, according to CBRE Group Inc.
The area known as Marina Bay is a 360-hectare (890-acre) development area created from reclaiming land off the sea fronting the banking district, and now includes Las Vegas Sands Corp.’s Marina Bay Sands casino-resort with a convention center that’s able to accommodate 45,000 delegates. Land reclamation played a prominent role in the growth of Singapore’s central business district, according to Los Angeles-based CBRE.
Rents in Marina Bay posted the strongest start to a recovery with rents climbing 10.9 percent in the three months ended June from the March quarter while the vacancy rate declined 2 percentage points to 3.6 percent, property consultant Cushman said.
“We are at a cusp where rents are bottoming out this year and pricing power will shift back to the landlords next year,” Vikrant Pandey, a Singapore-based analyst at UOB Kay Hian Pte, said. “The economy is picking up, which will translate into better office demand.”
Singapore last month raised its forecast for economic growth to a range of 2.5 percent to 3.5 percent this year. The government previously predicted growth of 1 percent to 3 percent. The economy expanded 2 percent in the first half, Prime Minister Lee Hsien Loong said on Aug. 8.
Not all agree that Singapore’s office leasing market is on a steady path to recovery. It remains difficult and fragile with the global economy still searching for a sustainable growth model, said Chia Siew Chuin, a Singapore-based director at Colliers International UK Plc. The 17 countries that share the euro remained the key area of concern with their governments trapped in austerity and their banks reluctant to lend because of economic uncertainties, she said.
Hongkong Land owns and manages about 450,000 square meters (4.8 million square feet) of prime commercial space in Hong Kong’s Central Business District. The company, based in the city, develops premium residential properties in countries including China and Singapore where its subsidiary, MCL Land Ltd., is a developer.
Shares of Hongkong Land fell 1.4 percent to $6.30 at the close of trading in Singapore, the biggest decline on the benchmark Straits Times Index. The stock has slid 9.9 percent this year, compared with a 3.8 percent drop for the Straits Times Index.
Among companies that are set to upgrade their offices are National Australia Bank Ltd. and Swiss Reinsurance Co., which plan to take space at Asia Square Tower 2 in the new business district, according to Colliers. The bank will move from Suntec Tower Five while Swiss Re will relocate from One Raffles Place Tower 1, Colliers said.
A lot of the new demand is also coming from energy and mining sectors such as BHP Billiton Ltd. and Rio Tinto Plc., Garman said.
“Overall, we are confident on Singapore,” Garman said. “Over the past 10 years, you have seen a migration of a lot of companies out of older stock, particularly the banks where they have more demanding needs that the older buildings cannot provide.”