Two office floors in Samsung Hub going for record $4,000 psf

/ EdgeProp Singapore |

August 20, 2020 6:00 AM SGT

SINGAPORE (EDGEPROP) - Two consecutive office floors at Samsung Hub, a Grade-A commercial development at 3 Church Street, are on sale at a record $4,000 psf. The office spaces on the ninth and 10th floors have a strata area of 13,110 sq ft each, and the indicative price translates to a total of $104.88 million.

If the two office floors are successfully sold at the indicative price, it would be the highest psf price achieved for an office floor in the 999-year leasehold commercial development. The office floors can be acquired collectively or individually, and both are currently tenanted.

CBRE is the sole marketing agent for the properties. The owner of the two office floors is Sun Venture, a local real estate developer with other investment interests in 71 Robinson, Westgate Tower, and the retail mall at Paya Lebar Square.

Completed in 2006, the 30-storey Samsung Hub was jointly developed by CapitaLand, OCBC Properties, the Singapore Chinese Chamber of Commerce, and South Korean conglomerate Samsung Group. (Picture: CBRE)

The current record price at Samsung Hub was set in February this year when the strata office on the 11th floor fetched $49.78 million. It comprises four strata units of 13,100 sq ft in total, and the $3,800 psf is the highest psf price for a single strata office floor within the CBD in the last five years. CBRE was the broker of this deal and the buyer is a South Korean family office.

“Ownership within Samsung Hub is tightly held as the various owners have been able to continuously enjoy capital growth over the years; for instance, capital appreciation has been about 10% to 15% over the last two years. As such, the 999-year leasehold office floors at Samsung Hub are seldom traded,” says Michael Tay, head of capital markets, Singapore, at CBRE.

Completed in 2006, the 30-storey Samsung Hub was jointly developed by CapitaLand, OCBC Properties, the Singapore Chinese Chamber of Commerce, and South Korean conglomerate Samsung Group, which is also the anchor tenant. As a prime Grade-A office tower in the CBD, Samsung Hub is also a rare commercial development with a 999-year leasehold tenure. The building features excellent attributes such as a double volume entrance lobby, 177 car park lots, and office spaces that comprise regular, column-free layout with floor-to-ceiling height of 2.7 metres.

Keen interest from Chinese and Hong Kong investors

According to Tay, most office floors in Samsung Hub have different owners, and this sale is a rare chance to acquire two consecutive floors within the highly sought-after building. “We expect keen interest from a wide range of owner-occupiers and investors such as boutique real estate funds, family offices, local companies, and high net-worth investors,” says Tay.

He anticipates interest from buyers based in Hong Kong and mainland China. “We cannot overemphasise what is currently happening in Hong Kong, as well as [the impact on] Chinese capital based in Hong Kong, and I think Singapore is still a very natural alternative choice for these investors. We are seeing enquiries, and we think that due to the size of [Samsung Hub] and the nature of this asset, it may be possible to attract some buyers without them inspecting the development,” says Tay.

Tay: Despite the current Covid-19 situation, the office sector has proven its resilience due to a tight office supply which will lend support to rental growth. (Picture: CBRE)

According to Clemence Lee, senior director of capital markets at CBRE, Samsung Hub has a track record of attracting Korean and Chinese firms and family offices. “This is due to the fact that the development has a 999-year lease, is a Grade-A development, and boasts a relatively large floor plate,” he says.

For example, the office space on the 20th floor changed hands for $46 million ($3,550 psf) in April 2018. The seller was a Hong Kong-based Chinese company who sold the property to another Chinese company, says Lee.

On top of the potential capital appreciation, many high net-worth family offices are on the hunt for stable, high-quality assets, says Lee. “A freehold asset tends to retain its value very well over the long term. This is another reason why they choose to invest in Singapore, given that we are a politically stable financial hub in the region,” he adds.

Supply crunch supports rental growth

CBRE says that its current projection of the local commercial real estate market over the next few years casts favourable conditions in which to market a big-ticket asset like the two office floors at Samsung Hub.

Tay says: “Despite the current Covid-19 situation, the office sector has proven its resilience due to a tight office supply which will lend support to rental growth over the mid- to long-term. Investors’ unwavering confidence in the Singapore office market is evident by the recent sale of Robinson Point at $500 million ($3,720 psf on nett lettable area), and the sale of the 11th floor at Samsung Hub at $49.8 million ($3,800 psf on strata area).”

Lee: Samsung Hub is highly desirable due to its 999-year leasehold land tenure, Grade-A specifications, and relatively large office floor plate. (Picture: CBRE)

Recently announced redevelopment plans for AXA Tower will also displace several companies such as e-commerce group Lazada. According to Tay, Lazada is considering premises such as One Raffles Place and 30 Raffles Place, although it has yet to decide on a location. In May, a consortium of investors led by mainboard-listed Perennial Real Estate Holdings announced the sale of a 50% stake in AXA Tower to Alibaba Singapore, a subsidiary of Chinese e-commerce giant Alibaba Group Holding. The deal is based on a property purchase price of $1.68 billion.

“There has been a healthy body of tenants looking for space in the city, and part of this is driven by the rejuvenation of buildings including AXA Tower and Fuji Zerox Tower. Many tenants there have been in the CBD for a long time and they prefer to be located in the CBD,” says Tay. This could form the base of the office demand for the next 12–18 months, he says.

Office supply in fringe CBD locations is also very tight, including areas such as Labrador, Buona Vista, Alexandria, Harbourfront, and Paya Lebar, says Tay. “There is a gap in terms of the supply of new office space and business parks in the city-fringe locations. Thus, some tenants may be driven, from a supply perspective, into office spaces in the CBD,” he adds.

No more exponential growth from co-working

The pandemic has hit co-working operators particularly hard, on the back of the sector’s exponential growth in Singapore over the last three years, says Tay, noting that average occupancy has dropped from about 90% to close to 60% in some cases.

“There is stress in the market but we have not seen any co-working operator go under in Singapore. All of them are still holding onto the space they have leased, with some help from landlords and government support packages,” he says. Even before the full economic impact of the pandemic hit, co-working operators here had begun to taper their office space demand and become more selective in their choices, Tay observes.

Demand for office space from co-working operators is expected to moderate in the short term, and the office space that these operators have leased over the past two years is unlikely to return to the market anytime soon, says Tay.

Looking ahead, one of the big changes from commercial occupiers could be the density of office workers in an office building due to safe distancing and heightened awareness of health and wellness factors, says Tay.

“The last four years has seen average office space usage gone down, and in extreme cases to about 70 sq ft per person. Historically, offices in Singapore tend to offer on average 100 to 120 sq ft per person, and in some cases even up to 150 sq ft per person. But I think going forward, the market will try to find a new compromise in light of what we have learnt from this pandemic,” he says.

This is influencing consolidation plans as some tenants re-evaluate if they should continue to lease separate locations or to consolidate. Many companies have shared that having separate teams is not ideal for them in the long term, says Tay.

“These are important questions that need to be answered, but it will take more time for companies to come to terms with what is the most balanced and best approach for their people,” he adds.

Check out the latest listings near Samsung Hub, Paya Lebar Square, Robinson Point and One Raffles Place

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