Decentralisation of office space into the regional and sub-regional centres in Singapore has so far been limited to Tampines Regional Centre until recently when the development of Jurong East Regional Centre picked up pace.
Over the past two years, two mixed-use sites in Jurong East were sold for over SGD 1.7 billion; which is expected to yield a total of 630,000 sq ft of office space. Public agencies leading the relocation include the Ministry of National Development (MND), the Agri-Food & Veterinary Authority (AVA) and the Building and Construction Authority (BCA), which will be taking up the whole office component (310,000 sq ft) in one of the upcoming projects, Jem by Lend Lease.
Over the past ten years, the Central Business District (CBD) Core activity has intensified. The working population is estimated to have grown from 140,000 in 2002 to 201,000 in 2011, a CAGR of 4.0% per annum and pressure on public transport and amenities is mounting; Singapore has not adopted staggered working hours and retail supply per worker has fallen from 5.1 sq ft to 4.2 sq ft.
Occupiers are exploring these decentralised options as part of their long-term cost-cutting strategies. However, the feedback is that amenities have to be in place before companies are willing to set up offices there. Yet, the retail supply per capita (including both working and residential population) in Jurong East is expected to be 3.5 sq ft by 2014, above that of Tampines (3.1 sq ft) as a benchmark. These retailers will include Cathay Cineplex, Robinsons Departmental Store and Fairprice Xtra hypermarket located in Jem. The development of commercial activities in Jurong East could very well be led by retail supply, similar to Tampines. Most of the office buildings in the latter were able to secure almost full occupancy except during a downturn when new supply came on-stream.
Office rentals in the decentralised areas are typically about 30% lower than that in the CBD. The rate of $5.40 per sq ft by end-2011 was last seen in the CBD Core in mid-2006; and, there is no inkling if the CBD Core rentals would ever return to this level. This may bode well for decentralised office locations as astute occupiers look for cost saving opportunities in these cheaper alternatives.
Another decentralised office location to watch would be the Paya Lebar Sub-regional Centre, where Paya Lebar Square (430,000 sq ft) is scheduled for completion in 2014.
About the author
Yali Tan is Assistant Manager of Research for Jones Lang LaSalle in Singapore.