CapitaSpring banks on ‘back to office’, recovery in premium office space

/ EdgeProp Singapore |

February 25, 2022 8:00 AM SGT

CapitaSpring, a 51-storey integrated development in Raffles Place, is the newest addition to Singapore’s CBD skyline (Photo: Samuel Isaac Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) - A year ago, when CapitaSpring, the 280m tall landmark in Singapore’s CBD was topped out at a ceremony on Feb 9, 2021, only 38% of its premium office space was committed. The 51-storey tower with sleek aluminium façade and pinstriped fins is designed by architecture firm Bjarke Ingels Group (BIG) in collaboration with Carlo Ratti Associati (CRA). The building received its temporary occupation permit (TOP) at the end of last year.

One year on, the office space which totals 661,000 sq ft in net lettable area (NLA) is 93% leased. “The positive market reception for CapitaSpring reinforces our confidence that offices continue to remain an integral part of companies’ workplace strategies,” commented Tony Tan, CEO of CapitaLand Integrated Commercial Trust (CICT), in a press statement on Feb 9.

CapitaSpring is jointly developed by CapitaLand, CICT and Mitsubishi Estate Co. While CapitaLand and CICT each hold a 40% stake in the $1.82 billion development, Mitsubishi holds the remaining 10%.

CAPITASPRING MEDIA TOUR - EDGEPROP SINGAPORE

An 18m-high media wall by art collective teamLab continuously renders artwork in real time across 2,160 LED screens in CapitaSpring’s lobby (Photo: Samuel Isaac Chua/The Edge Singapore)

It is a redevelopment of the former Golden Shoe Carpark building that opened in 1984. The 10-storey block contained a multi-storey carpark with 1,074 parking spaces on the upper floors. The three lower floors were taken up by hawker stalls of the “Golden Shoe Hawker Centre”, which was officially named Market Street Food Centre. The building had 17 shops, a restaurant and even a petrol kiosk on the ground floor.

Even though the old Golden Shoe Carpark is gone, the reincarnated Market Street Hawker Centre, owned by the Ministry of Sustainability and the Environment, will take up two floors (levels 2 and 3) at CapitaSpring. The 56 stalls at the new hawker centre are slated to open in April. Besides Market Street Hawker Centre, the first eight floors of CapitaSpring will have retail and F&B units and carparking.

Serviced apartments, offices

Above the retail podium is the 299-unit Citadines Raffles Place Singapore, with the flagship Citadines Apart’hotel brand managed by The Ascott. The apartments are a mix of lofts, studios, and one- and two-bedroom units. As these are serviced apartments, the minimum length of stay is six nights.

Offices occupy the upper half of the tower — from levels 21 to 49. They are of high specifications, with 22,000 sq ft column-free floor plates and 3.2m ceiling height. Tenants have the option for inter-floor connectivity.

Citadines Raffles Place Singapore - EDGEPROP SINGAPORE

The 299-unit serviced residence Citadines Raffles Place Singapore opens as the new flagship for Citadines Apart’hotel, managed by The Ascott (Photo: CapitaLand)

About 10% or 69,100 sq ft of the office space has been dedicated to flexible workspace that are spread across various floors in the tower, namely levels 21, 39 and 40. They are fitted with workstations, meeting rooms, private offices and areas for training, conducting workshops or events. The flexible workspace is managed in partnership with The Work Project. “We have designed for these flexible workspaces to be operated as part of the building’s amenities rather than as a standalone business,” says Chris Chong, CEO of retail and workspace (Singapore and Malaysia), CapitaLand Investment (CLI).

Tenants in the building include multinational corporations across a wide spectrum — from banking to financial services, real estate, energy, commodities, technology, legal and hospitality services. Anchor tenant JP Morgan has moved in, occupying 155,000 sq ft within the building. Sumitomo Mitsui Banking Corporation has taken up close to 70,000 sq ft. Meanwhile, IBM subsidiary software company Red Hat has taken up 57,500 sq ft at CapitaSpring, moving from AXA Tower, which will be redeveloped.

Real estate firm JLL has taken up 23,592 sq ft on the 35th floor for its new “regenerative office”, moving from Republic Plaza where it had been for the last 24 years. Online trading and investment specialists Saxo Markets has 14,000 sq ft office space at CapitaSpring, 15% more than its previous premises at Samsung Hub. Other tenants that have moved in include international law firm White & Case and American hotel group, Wyndham Hotels & Resorts.

‘Star of the show’

“CapitaSpring remains the ‘star of the show’ and is easily the top new office development in the Raffles Place area,” comments Corporate Locations in its 4Q2021 report. Recent deals at CapitaSpring include asset management firm Millennium Capital Management leasing 60,000 sq ft over two whole floors. It is relocating from UOB Plaza II. Hedge fund firm Southern Ridges Capital is relocating from 18 Robinson Road to CapitaSpring, while PGIM/ Pramerica Financial Asia is moving from One Raffles Place Tower 2.

Even asking rents at CapitaSpring are at a premium, with gross rents of $14 to $16 psf per month, compared to the average Grade-A office rents in the Raffles Place/Marina Bay area which are hovering in the range of $10.50 to $11.75 psf per month, according to office specialists Corporate Locations.

The strong take-up rate at CapitaSpring over the course of the last 12 months mirrors the rally in the CBD Grade-A office sector. CBD Grade-A rents bottomed in 1Q2021 and bounced back in 2Q2021, according to Tay Huey Ying, JLL Singapore head of research and consultancy. Rents have been on an upward trajectory for the last two quarters of 2021, bringing average CBD Grade-A monthly office rents to $10.23 psf in 4Q2021, compared to $9.81 psf the year before.

With more companies preparing for their staff to return to office, JLL’s Tay projects that office demand for 2022 could outpace supply. Rental growth, she predicts, could be twice as fast as the rate recorded in 2021. “We foresee business expansion to pick up pace while downsizing and cessation to slow further,” she comments. More corporates are also expected to set up shop or strengthen their presence in Singapore, she adds.

‘Lack of supply, reasonable demand’

The only new premium office complex expected to come onstream later this year is Guoco Midtown at Beach Road, with 700,000 sq ft (NLA) of premium office space. IOI Central Boulevard in the CBD, with 1.26 million sq ft of Grade-A office space is targeted for completion in 3Q2023. The redevelopment of Shaw Tower is scheduled for completion sometime in 2025, and will add 450,000 sq ft of Grade-A office space to Beach Road.

Meanwhile, leasing activity has ceased at AXA Tower, where redevelopment is slated to take place. “This will further accentuate the tight supply condition, bringing Grade-A office vacancy rate in the CBD to 7% or lower, from 8.6% in 4Q2021,” says JLL’s Tay. Against this backdrop, JLL is projecting Grade-A CBD office rents in 2022 to more than double the 4.2% growth in 2021.

Corporate Locations concurs, forecasting that rates will continue to advance for the next three years due to “lack of supply and the presence of reasonable demand”. According to Corporate Locations, “Singapore will continue to attract global MNCs looking for a stable financial hub location in the region to set up their Asia Pacific headquarters. The future for the Singapore office market is looking strong for both landlords and tenants (for the moment).”

An interesting market trend is the shift in focus of companies towards employee attraction and retention. “Tenants are starting to place a higher importance on how a building’s amenities support their employees’ wellbeing and engagement,” says CLI’s Chong.

Green credentials – new building criterion

More corporate tenants are also placing greater emphasis on green office spaces and a building’s green credentials could become a key criterion when shortlisting spaces to lease, notes Cushman & Wakefield in its recent office report.

CapitaSpring has achieved the highest rating in sustainability, Building and Construction Authority’s (BCA) Green Mark Platinum. It has also achieved the BCA Universal Design Mark GoldPLUS Award for its landscaping, with over 90,000 sq ft dedicated to landscaping and incorporating over 80,000 plants and more than 130 different plant species.

The Green Oasis is a botanical promenade located on levels 17 to 20 of the development (Photo: CapitaLand)

Green spaces within the building include Green Oasis, a botanical promenade located on levels 17 to 20, between the serviced residences and the offices. Work-live-play amenities are also incorporated into the space with a 35m height, including an amphitheatre, work pods that come equipped with power points and charging ports, jungle gyms, as well as a cafe.

The Sky Garden on Level 51 features an observatory deck offering 360-degree views of Marina Bay and the CBD, as well as an urban farm managed in partnership with Edible Garden City. Also located here are Kaarla Restaurant and Bar as well as Kappo restaurant Oumi, run by F&B group 1-Group, which is scheduled for launch next quarter.

There are also community spaces on the first level, for instance the City Room, a sheltered public alcove on Level 1, adjacent to a 12,500 sq ft public park. CapitaSpring will also be curating events and networking opportunities at the various community spaces.

As new premium office towers like CapitaSpring up the ante on their offerings, the rental gap between Grade-A office buildings and Grade-B office buildings in the CBD will widen even further, says June Chua, Colliers International Singapore executive director and head of tenant representation, in a Feb 15 report. “There is now more urgency for the older office buildings to upgrade and refresh their image,” she adds.