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SPECIAL REPORTMarina Bay:
A Garden City by the Bay | A Global Business Hub
August 2012
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Executive Summary• AsSingaporeapproached thenewmillennium,the continued expansion of Singapore’seconomy as well as its fast growing financialsector,highlightedtheneedforafreshsupplyofqualitycommercialspaceinorderforSingaporeto achieve its status as a financial hub. Yearsof development had led to the need for urbanregenerationandaneedfor“breathingspace”fortheexpansionoftheCBD.
• MarinaBayisthenewgrowthareaslatedtobethe new extension of the traditional CBD. It isplannedaroundanurbangridpatternextendingfromtheexistingcitygridnetworkwitheachparcelof land readily prepared to allowdevelopmentflexibility in the sizes of the land parcels viafurtheramalgamationandsub-divisionaswellasthroughtheremovalandcreationofnewaccessandserviceroads.
• Development flexibility is further extended tothedeveloperswhen thedevelopment sitesarezoned “white” by theURA. The “white” zoningoffers these developers the autonomy for avarietyofuseswithinthedevelopmentaswellastheabilitytorespondtochangingmarketneedsinthefuture.
• Public sector investment has been pivotal tothe successful development of Marina Bay.MarinaBaybenefitsfromaslewofpublicsectorinvestmentsininfrastructure.
• MarinaBaystandsoutnotonly for itsability toattractMNCoccupiers,butasizeablenumberofforeigninvestorswhohavebeenactivelyinvolvedin building up an impressive number of iconicdevelopmentsalongtheBay.Sofar,investmentsintotheMarinaBayhavecomefrombothlocaldevelopers as well as developers from HongKong,USA,MalaysiaandAustralia.
• With a prime waterfront location, higherspecifications and larger floor plates, buildingsinMarinaBayhavecontributed toarise in theoverallaveragemarketrent.
• Of the six office towers totaling 5.5 million sfcompleted since 2006, the average pre-leasecommitment level upon completion is 82 %.Thisisanextraordinaryleasingperformancebyanyglobal comparison especiallywith four outof the six towers were essentially 100% pre-letuponcompletion.
• Unsurprisingly, occupiers from the financialsector dominate. So far, approximately 65% ofthe occupied space inMarina Bay buildings istakenupbyfinancialinstitutions.
• The Marina Bay office market may still bepropelled by the impending growth of thecomplementaryindustriesastheseindustriesmaystillconsiderexpandingtheirpresenceinthebayareagiventherightterms.
• WhilemorethanS$7.5billionhasbeeninvestedbythegovernmenttodate,CBREestimatesthatmore than S$6.2 billion has been received byURAfromthesaleoflandparcels(thisexcludesproceeds fromOneMarina Boulevardand theM+SMarinaOnedevelopmentsite.)
• There has also been more than S$25 billionworth of local and foreign equity pumped intothe developments. Notwithstanding the indirectcontributionstothestate’sGDPandemploymentcreation,MarinaBaylookstobeoneofthemostlucrativeinvestmentsever.
• Wewaitwithmuchanticipation thenext phaseofdevelopmentofMarinaBay-willMarinaBaydeliver its full potential to transform Singaporeintoaworldwinningcity?
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IntroductionInJuly2012,SingaporeplayedhostfortheWorldCities Summit. This biennale global summit wason its third run and has brought together worldleaders and leading experts to confer on publicgovernance and the sustainable development ofcities. The summit also saw theawardof the LeeKuan YewWorld City Prize to theMayor of NewYorkCity,MichaelBloombergandtheDepartmentsof Transportation, City Planning and Parks andRecreation,NewYork.TheLeeKuanYewWorldCityPrizeisabiennialinternationalawardthathonoursoutstanding contributions towards the creation ofvibrant,liveableandsustainableurbancommunitiesaroundtheworld.
Followingthetraumaticeventsof2001,NewYorkCity’s transformation is a tribute to the dynamicleadershipofMayorBloomberg, theDepartmentsof Transportation, City Planning and Parks andRecreation,aswell asother city agencies, and tothe dedicated partnership between the city andits stakeholders to implement a shared visionforthecity.
One of the key strategies underlying New York’ssuccessful transformation in the lastdecade is theinvestment in public infrastructure to increase thecity’s livability and sustainability. This illustratesthe importance roles played State investmentssupportingpublic-privatesectorpartnerships.
Drawing on the above precedents, this paperwill plot the growth of Marina Bay and its key
contribution to the emergence of Singapore as atrulyglobalcity.ItwilldiscusstheevolutionofMarinaBay, the involvement of both the public andprivate sectors’, provide a critique on its impactonSingapore’sCentralBusinessDistrictandofferviews on the future outlook for this “gamechanging”location.
Marina Bay: “A Garden City by the Bay”A Brief HistoryBack in March 2004, the Minister for NationalDevelopmentannouncedthatMarinaBaywouldbeSingapore’skeyfocusfordevelopmentinthenext15to20years.TheUrbanRedevelopmentAuthority(URA),Singapore’snationallanduseplanningandconservation authority, was tasked as the masterplannerandplacemanagerforMarinaBay.
ThevisionforMarinaBayis“AGardenCitybytheBay”.Notwithstanding this “green” lifestyle vision,MarinaBaywouldplayapivotalroletoSingapore’scontinuedgrowthasaninternationalbusinessandfinancialhub,-itofferedtheprospectofadistinctive24/7 location for business, living, working andleisure.MarinaBaywasenvisionedasaplaceforpeopleto“explore,exchangeandentertain”.
In physical terms Marina Bay is a 360 hadevelopmentareacreatedfromreclaiminglandofftheseafrontatCollyerQuay.LandreclamationhasalwaysplayedaprominentroleinthespatialgrowthofSingapore’sCentralBusinessDistrict(CBD).
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ThetraditionalCBDofRafflesPlace,ShentonWayandTanjongPagarisapproximately82ha.BasedonCBREestimates,thistraditionalCBDyieldsabout21.6millionsfofofficespace.Yearsofdevelopmenthas led to the need for urban regeneration andaneedfor“breathingspace”fortheexpansionoftheCBD.
AsSingaporeapproachedthenewmillennium,thecontinued expansion of Singapore’s economy aswellasitsfastgrowingfinancialsector,highlightedtheneed fora freshsupplyofqualitycommercialspaceinorderforSingaporetoachieveitsstatusasafinancialhub.
ThenextphaseofreclamationworkssubsequentlycreatedMarina Centre andMarina South. ThesetwoareasarecollectivelyknownasMarinaBay.
A new growth area of approximately 80 ha hadbeendemarcatedwithinMarinaBayandslatedtobethenewextensionofthetraditionalCBD.Thisnewgrowthareaatmore than twice thesitecoverageofLondon’sCanaryWharfwasexpectedtodeliverpotentially2.82millionsqm(approximately30.4millionsf)ofofficespacewhenfullydeveloped.Thisisapproximatelyequivalent toHongKong’sofficespacewithinCentral.
Hence,takingintoconsiderationboththetraditionalCBDaswellasthisnewgrowtharea,theSingaporeofficespacewasexpectedtomorethandoubleinsizeto52millionsfwhenitsdevelopmentpotentialisfullymet.
Whilst this represents tremendous expansion forSingaporewhen compared to theNew York, thisprojectedfutureofficestockisstill40%smallerthanthatofManhattanDowntown.
State InvolvementURA - Master Planner & Place ManagerThedevelopmentofMarinaBayismodeledafterapublic-private partnershipwhere the State puts inplaceinfrastructureinvestmentswhiledevelopmentsites are released to the private sector for theirexpertiseandentrepreneurship.Urbandesignsandplanning objectives are articulated and achievedthroughconditionsimposedonthesesites.
It is very important that URA is both the masterplannerandplacemanagerforMarinaBay.Underthis arrangement, the private sector is ensured acentral governing body that is able to coordinatetheinfrastructuraldevelopmentsfromitsconceptualtotheoperationalstages.
Development Flexibility: a distinct advantage for developers, corporate occupiersMarina Bay is planned around an urban gridpattern extending from the existing city gridnetwork.Eachparceloflandisreadilypreparedtoallowdevelopmentflexibilityinthesizesofthelandparcelsviafurtheramalgamationandsub-divisionaswellasthroughtheremovalandcreationofnewaccessandserviceroads.
Development flexibility is further extended to thedeveloperswhenthedevelopmentsitesarezoned“white”bytheURA.The“white”zoningoffersthesedeveloperstheautonomyforavarietyofuseswithinthedevelopmentaswellastheabilitytorespondtochangingmarketneedsinthefuture.
Another unique characteristic about developinginMarina Bay is the shape and size of the landlotsavailable.Largeregularlandparcelsnotonlybenefitsthedeveloperindemolitioncostsandtimesavings,theyalsoofferthedevelopertheflexibilitytocreatelargeandregularshapedfloorplates intheirdevelopments.
Marina Bay – Extension of the Financial District
Source:URA
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Such floor configurations are favoured by multi-nationalcompanies(especiallyfinancialinstitutions)whoprefertobelocatedinlargeefficientcolumn-free office spaces, supported by state-of-the-artspecificationslikebackuppower,generousfloortoceilingheightetc.
Infrastructure Investments: a boon to Marina BayPublic sector investment has been pivotal to thesuccessfuldevelopmentofMarinaBay.MarinaBaybenefitsfromaslewofpublicsectorinvestmentsininfrastructure.IthasbeenreportedthatmorethanS$7.5billionhasbeeninvestedwithanadditionalS$1billionexpectedoverthenext10to15years.One of the key infrastructural investments is theCommon Services Tunnel (CST). This 20 kmCSTisacomprehensiveundergroundnetworkthatwillhouse telecommunication and utilities provisionscomplete with 100% emergency backup servicesthatwillbereadilyaccessibleforimmediateusage,forexpansionortomeetchangingutilityneeds.
WiththeCST,disruptioncausedbyroadexcavationis eradicated and easier project contruction isensuredastheroadsystemcannowbeutilised.Atacostapproximately$250million,SingaporeisthefirstcountryinSoutheastAsia,andthesecondAsiancountry after Japan, to implement a CST systemwithinadevelopmentarea.
The CST, will also accomodate an undergroundsuction garbage disposal system, also called thepneumatic refuse conveyance system (PRCS). TheNational Environment Agency has launched arequest for proposal for a design, build, operatecontractforthePRCSinMarinaBayfora30-yearperiod.
Other major key infrastructure developmentsinclude the $110 million District Cooling Plant,where individualdevelopmentswithinMarinaBayarenotrequiredtoprovideindividualchillerplantsandcooling towersso that theyareable toutilisesuchspaceforothercreativeuses;the$226millionMarinaBarrage,whichisatidalbarrierbuiltacrossthe Marina Channel that also forms Singapore’s15th reservoir and the first city reservoir; acomprehensive transport networkwith at least sixlinkedmetrostationsby2020,newroadextensions
tothecityandairportaswellaswatertaxisasanalternativemodeoftransportation.
Inaddition,theMarinaCentre,CollyerQuayandBayfrontareasarenowconnectedwitha3.5kmlandscaped waterfront promenade. The BayfrontBridgeandHelixBridgewillenhancevehicularandpedestrianaccessibilityrespectively.ToreaffirmthevisionofMarinaBay tobe“AGardenCityby theBay”,thefirstphaseoftheGardensByTheBay,theBaySouthGardenwasopenedinJune2012.
When fully completed, Gardens By The Bay willconsist of Bay South, Bay East and Bay Centralandwilloccupy101hectaresofprimelandbythewaterattheheartofSingapore’snewdowntownatMarinaBay.
Marina Bay: A Global Business Hub Given the strong public sector involvement,Marina Bay was primed to attract both investorsand occupiers from around the globe. With theURA regulating the release of land in line withanticipatedmarketdemand, the financial industrywasnaturally,achieftarget.
Marina Bay stands out not only for its ability toattractMNCoccupiers, but a sizeable number offoreign investorswhohavebeenactively involvedin building up an impressive number of iconicdevelopments along the Bay. So far, investmentsinto the Marina Bay have come from both localdevelopersaswellasdevelopersfromHongKong,USA,MalaysiaandAustralia.
To date,Marina Bay boasts a high concentrationofMNCfinancialinstitutions.Thisisinpartaresultof the MAS’ five-year programme to liberaliseSingapore’sbankingsectorwiththecreationoftheQualifyingFullBank(QFB),anewcategoryundertheforeignbankscategorywasset.Sofar,sixbankswithregionalandinternationalstandinghavebeenawardedtheQFBlicences.
In addition, the multinational banks have alsocontinued to be active in the wholesale bankingmarketandinwealthmanagement.TheyarealsousingSingaporeastheirbasetoservicecorporationsandhighnetworthindividualsintheregion.
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Major financial institutions, including the likesof Standard Chartered Bank, Credit Suisse andBarclaysCapitalhavealsodecidedtorelocatemanyoftheirregionalandglobalfunctionstoSingapore.
The liberalisation of Singapore’s financial sectorinevitably led to a boost in occupier demand foroffice space,especially in theCBDarea.There isa myriad of occupiers from different industriesdomiciled from across the world, a testament ofSingaporeandMarinaBay’sglobalattractiveness.
Occupiers By Country of Origin
29%
19%
7%
1%
1%
1%
3%
5%
4%
2%
18%
9% AustraliaCanadaChinaFranceGermanyHolland Hong KongJapanSingaporeSwitzerlandunited KingdomuSAothers
Source:CBREResearch
Common Services Tunnel P1
Marina Barrage
One Marina BoulevardSingapore Labour Foundation
Office: 395,600 sf
One Raffles QuayKeppel Land, Cheung Kong (Holdings) Ltd and Hongkong Land)
North Twr Office: 776,100 sf South Twr Office: 565,000 sf
The Sail @ Marina BayCity Developments
1,111 Residential Units Retail: 29,000 sf
Marina Bay SandsLas Vegas Sands
Retail: 800,000 sf Convention Space: 1.3 mill sf 2,561 Hotel rooms
2004 2005 20072006 2008 2009
Source:RQAM Source:CDL Source:LucianTeo
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According to CBRE statistics, while a relativelysignificantportionofoccupiedspaceinMarinaBayis from Singaporean firms (18%); the two largestoccupier nationalities are from United Kingdom(29%)andUSA(19%).
Notsurprisingly,whenbrokendownintocontinents,itisalsoshownthatmostoccupiersarefrommulti-national companies domiciled in Europe (51%),Asia(22%)andNorthAmerica(20%).
Occupiers By Continent of Origin
51%20%
22%
7%
AsiaAustraliaEuropenorth America
Source:CBREResearch
Helix Bridge Gardens By The Bay
Marina Bay ResidencesKeppel Land, Cheung Kong (Holdings) Ltd and Hongkong Land)
428 Residential Units
Marina Bay Financial Centre Keppel Land, Cheung Kong (Holdings) Ltd and Hongkong Land)
Office: Twr 1: 614,000 sf Twr 2: 987,000 sf Twr 3: 1.3 mill sf Retail: 179,000 sf
Asia Square Tower 1 & 2MGPA
Office: Twr 1: 1.26 mill sf Twr 2: 782,300 sf Retail: 61,000 sf 280 Hotel rooms
Marina Bay SuitesKeppel Land, Cheung Kong (Holdings) Ltd and Hongkong Land)
221 Residential Units
V On ShentonUIC Ltd
Office: 290,000 sf 510 residential units
Marina OneM+S Pte Ltd
Office: 2.2 mill sf Retail: 1.83 mill sf Approx 1,000 residential units
2010 2011 20132012 2015-2016 2017
Source:RQAM Source:RQAM Source:RQAMSource:MGPA
Source:LucianTeoSource:LucianTeo
Source:UICLtd
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Office DynamicsThe introduction of Marina Bay as a potentialextensionoftheexistingCBDpresentedtheprivatesector an “empty canvas” for future investmentsand developments. The pace of momentum inleasingactivityhasbeenfrenetic,asaresultofthepent-updemandintheearly2000s.
In 2004, Marina Bay welcomed the first officebuilding with the completion of One MarinaBoulevard(395,600sf).Officesupplystillremainedtight with strong absorption levels, compressingvacancyratesandstillnonewsupplyfor2005.
With limited land, new development sites inSingapore’sCBDwerescarceandhard tocomeby.NewCBDofficesupplywasthusverytightfrom1999,despitefacinggrowingdemand.Thelimitedmajor supply to come online wasCapital Tower(717,357sf)andSGXCentre1&2 (277,709sf&284,998sf)in2000.SpringleafTowerwastheonlyothersupplytocomeonlaterin2002.
The completion of One Raffles Quay North &SouthTowers(565,000sf&776,084sf)andOneGeorgeStreet(445,000sf)in2006wastimelyasitcoincidedwiththeliberalisationofthefinancialindustry.
During this period, major financial institutionswere in an expansionary mode, seeking forqualitybuildingsstrategically locatedandabletooffer large contiguous space to consolidate theirbusinesses. As a result, office space absorptiongrew and vacancies dipped. Boosted by positiveGDP growth, office demand grew and officerentalsalsostartedtoclimb.
CBD Core Office Supply and DemandW 8cm
-1,000 -4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0
-500
1,000
500
2,000
1,500
3,000
2,500
3,500
1999
2000
2001
2002
2003
2004
2005
2006
2007
H1
2012
2011
2010
2009
2008
net new Supplynet Absorption (LHA) Vacancy Rate (RHA)
nLA
‘000
sf
Source:CBREResearch
From 2007 till 2009, tight supply conditionsprevailed. During this period the only majorconfirmedCBDsupplyonthehorizonwasfromthecompletionofthefirstphaseofMarinaBayFinancialCentreinMarinaBayscheduledforcompletionin2010. During this supply crunch, rental growthpeaked with Grade A Office rents recorded atS$18.80psfpermonthinQ22008.
Thelastquarterof2008markedtheimpactoftheGlobalFinancialCrisiswhenGradeAOfficerentsfell bymore than50% to S$8.00psf permonth.TheresilienceoftheSingaporeeconomyandofficemarket was demonstrated when Grade A OfficerentswitnessedaquickrecoveryfromQ22010.
Thisstrongrecoveryphasewasrelativelyshort-livedwith Grade A Office rents reaching S$11.05 psfpermonth inQ32011,as theeffectsof theEuroDebtCrisisstartedtoimpactthekeybankingsectorinparticularresultinginabreakonGradeAOfficerentalgrowths.
However, it shouldbenoted that therecent troughin theGradeAOfficerentalmarkethas illustratedaresilienceandsuggestedanewlowinthismarket.While rental growth is not expected to mimic thestellargrowthduringthe2006–2008supplycrunchepisode,GradeAOfficerentsarealsonotexpectedto correct to the levels as experienced over thepastdecade.
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Whilethe10yearaverageforGradeAOfficerentsiscalculatedtobeS$9.10psfpermonth,the5yearaveragehas risen to S$10.60psf permonth. Thehigher troughvalueandaveragevaluereflects theinfluenceofMarinaBaybuildingsintherentalbasket.
Grade A Office RentsW 8cm
0
10-yr Historic Grade A Rent: S$9.1
8
6
4
2
16
14
12
10
24
22
20
18
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Grade A Rent Core CBD RentGrade A: MAX Grade A: MIn
5-yr Historic Grade A Rent: S$10.6
Source:CBREResearch
With a prime waterfront location, higherspecificationsand larger floorplates, buildings inMarinaBayhavecontributedtoariseintheoverallaveragemarket rent. There is a potential for themedianGradeArentstogrowfurtherinthelongtermasthemarketmaturesandwiththeimprovedqualityofstock.
Phenomenal Leasing Success The office developments at Marina Bay haveenjoyed unparalleled leasing success. All of thebuildingshavebeenbuiltspeculatively(exceptOneMarina Boulevard) and the endeavour shown bythedevelopershasbeenrichlyrewarded.Ofthesixofficetowerstotaling5.5millionsfcompletedsince2006,theaveragepre-leasecommitmentleveluponcompletionis82%.Thisisanextraordinaryleasingperformancebyanyglobalcomparisonespeciallywith fouroutof the six towers (OneRafflesQuayTower 1 and Tower 2 and Marina Bay FinancialCentreTower1andTower2)wereessentially100%pre-letuponcompletion.The quality of tenant mix and covenant strengthisanother stand-out featureof the leasingactivityat Marina Bay. Fortune 500 companies aboundwith many of the leading international banks attheforefront.
Strong Leasing Performance for Marina Bay Buildings
Quality Buildings TheinclusionofMarinaBaybuildingsalsoboostedthenumberofqualitybuildingsinourofficebasket.Takingfloorplatesizeasabenchmark,thereareat least fourteenofficedevelopments in theCBDthatcanofferfloorplatesofmorethan20,000sf,with threemore in thepipeline. In termsof totalquantum,thesebuildingscanofferapproximately13.5 million sf of large column free contiguousspace.Outofthesefourteenofficedevelopments,morethanhalfarelocatedinMarinaBay.
By contrast it is noteworthy thatHong Kong hasonly four office developments that can offerfloorplatesofmore than20,000sf representingapproximately3.6millionsfof suchoffice stock.This is slightly less than a third of Singapore’sequivalentofficespace.
TheemergenceofnewofficedevelopmentsmanyofwhicharelocatedinMarinaBayhascontributedto certain older buildings in the traditionalCBD facing up to functional obsolescence. Aninterestingby-productisthatthishasdrivenurbanrejuvenation. Several older office developmentshave either been refurbished or redeveloped inordertomaintaintheirrelevanceinthemarket.71RobinsonRoad,OceanFinancialCentreandOneRafflesPlaceTower2areexamplesofsuchrecentredevelopedcommercialbuildings.
oRQ South Tower
MBFC Tower 1
MBFC Tower 3
oRQ north Tower
MBFC Tower 2
Asia Square Tower 1
occupied Space Vacant Space
20%
10%
0%
40%
30%
60%
50%
80%
70%
90%
100%
Source:CBREResearch
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Distribution of Office Space According to Floor Plate Sizes
39%
44%
11% 9%
>20,000 sf20,000 – 30,000 sf<30,000 sfunknown
Source:CBREResearch
The growing maturity of the office market hasallowed the co-existence of the traditional CBDandMarinaBay.Singaporehasahealthy rangeof office buildings capable of accommodatingoccupierswithdifferingneedsandrequirements.
Occupier SnapshotCurrently,thereismorethan5.5millionsfofGradeAofficespacewithinsixbuildingsinMarinaBay.These6buildingsarealsohometoahostofmulti-nationalcompaniesfrom13differentindustries.
Unsurprisinglyoccupiersfromthefinancialsectordominate. So far, approximately 65% of theoccupiedspace inMarinaBaybuildings is takenupbyfinancialinstitutions.
Thisdominanceovershadowedtheotheroccupiersfromotherindustries.Legalfirmsaccountedforthenextbiggestoccupiershareat8%.Theinformationtechnologysectormadeup6%whilecommoditiesfirmsandinsurancefirmsbothrecorded5%ofthetotaloccupiedofficespace.
Occupier Profile in Marina Bay
65%8%
6%
5%
5%
Financial InstitutionLaw FirmInformation TechnologyInsurance FirmCommoditiesConsultancyAsset ManagerGovernmentBrokerHealthcareDeveloperService Providerothers
Source:CBREResearch
With Singapore having established itself as afinancial hub for major international financialinstitutions,ithasalsoattractedmanycomplementarysectors to Marina Bay seeking proximity to theirpotentialclients.
We have observed significant growth from lawfirms, information technology firms, as well ascommodities,energyandinsurancefirms.
Singaporehasbeenopeningupitslegalmarkettointernational law firms. The liberalization processincludesthegrantofQualifyingForeignLawPractice(QFLP) licences, the second round of which wasimplementedfrom1stJuly2012.InthefirstphaseinDecember2008 six foreign lawpracticeswereawarded licences, namelyAllen&Overy,CliffordChance,Latham&Watkins,White&Case,NortonRose,andHerbertSmith.
HoganLovells,AshurstandBaker&McKenziehavealsogrownexponentiallywhilstnewentrantshavealsocontributedtothisfastexpandingsector.
InMarinaBay, law firmshavegrown significantlyover the last 10 years, bymore than170% from2004 to2012.Withongoing liberalizationof thelegalsystem,furtheroccupierdemandisexpectedfromthissector.
In addition, other complementary industries suchas information technology firms, insurance firms,andcommoditiesfirmshavealsolocatedsignificantoperationsinMarinaBay.Bywayofillustrationtwo
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oftheworld’sleadingcommoditycompanies–BHPandRioTinto–haverecentlyestablishedregionalheadofficesinMBFC.
The Euro Debt Crisis has definitely taken a tollon many of the global financial institutions. Thisis especially so for those which have taken upsignificantamountofspaceintheMarinaBayareaover the last 3 years on the back of aggressiveexpansionplansinAsia.
The key demand driver for the past few years isforced to take a backseat, looming a fear of anoversupply situation based on this anticipateddemand.
Cumulative Occupier Profile in Marina Bay from Non-Financial Institutions
0
200
400
600
800
1,400
1,200
1,000
Thou
sand
s (S
qft)
2004 2006 2010 2011 2012
Law Firms Information Technology Insurance Firms
Commodities Healthcare Service Provider
Source:CBREResearch
With vacancyexpected to rise,much resistance isexpectedforfurtherrentalgrowthasthepreviouslydominating financial institutions have cut backon their budgets and review their originalexpansionplans.
Onthecontrary,thereisasilverliningarisingfromdemandarisingfromthecomplementaryindustries.(Chart 1.4) Despite the stunted growth of thefinancialindustry,theMarinaBayofficemarketmaystill bepropelledby the impendinggrowthof thecomplementary industries as these industriesmaystill consider expanding their presence in the bayareagiventherightterms.
GiventherecentlylaunchedMBFCTower3is66%let(outofthe1.3millionsf)duringpresstime,thetimingof thefuturesupplytobereleasedintothemarketisstillconsideredwellstaggeredtomeetthefuturedemand.
Looking ahead, the future office supply willbe generated from the completion of threedevelopmentsinthevicinity.TheyarenamelyAsiaSquareTower2(782,284sf)in2013,VonShenton(280,000sf)in2015andOneMarinadevelopmentfromM+SPteLtd(estimated2.2millionsf)in2017.
In addition, there is a 0.78 ha “white” site listedontheReserveListof theGovernmentLandSalesProgramme. When awarded, this site can addaminimum of 765,743 sf of office space to theMarinaBayarea.
Further future supply will be dependent on theGovernmentLandSalessystemandthegovernmentwillnodoubtbecloselymonitoringprivatesectormarketdemandindecidingwhentoreleasefuturesites.
Outlook for Singapore’s CBDLookingbackadecadeago, theCentralBusinessDistrict of Singaporehadundergone changeandexpansion,butwasessentiallyanareadesignatedfor the working population. The traditional CBDhadlimitedretailandentertainmentofferings.Witha lackof residentialcatchment, retailoutletswerealsolimitedbytheiropeninghours.TheCBDcouldhave been referred to as a virtual “ghost town”duringtheweekends.
With Marina Bay’s eight office developments(including OUE Bayfront and One MarinaBoulevard) totaling 6 million sf of prime officespace, CBRE’s estimates that there are currentlyup to200,000professionalsworking in theCBD.This represents approximately 50,000 additionalprofessionalscomparedto5yearsago. Betweennow to 2015, another 15,000 professionals areexpectedtobeworkingintheCBD.
TheresidentialdevelopmentsintheCBDareahavesimilarlyexpandedinresponsetoastrongappetiteto city living in Singapore. From 2007, the stockhasdoubled,with2,360residentialunitsaddedto
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themarket.Currently,therearebetween3,000and3,500residentialapartmentsintheCBD.Assumingthe national mean of 3.5 people per residentialunits,thiswouldtranslatetoaround17,000peoplealreadylivingSingapore’sCBD.Thisnumberissettogrow.Therehasbeenverystrongsalesperformanceachievedby the prime residential developments inMarina Bay. The profile of buyers includes owneroccupiers and investors. The latter group in largepart attracted by the tremendous pool of tenantsworkingintheoffice
Retail space in the Marina Bay location has alsoincreased significantly. At present there are threeretailmallswith1.12millionsfofretailspace.Thisis in addition to the existing retail stock in thetraditionalCBD.
TogetherwithtouristattractionssuchastheGardensBy The Bay and theMarina Bay Sands integratedresort,MarinaBayhassuccessfullyattractedablendofvisitors,investorsandoccupiersfromaroundtheworldtolive,workandplayinthisprecinct.
Asmentioned, whilstmore than S$7.5 billion hasbeen invested by the government to date. CBREestimates that more than S$6.2 billion has beenreceivedbyURAfromthesaleoflandparcels(thisexcludesproceedsfromOneMarinaBoulevardandtheM+SMarinaOnedevelopmentsite.)
Based on our estimation, there has been morethanS$25billionworthof localandforeignequitypumped into the developments. Notwithstandingthe indirect contributions to the state’s GDP andemploymentcreation,MarinaBaylookstobeoneofthemostlucrativeinvestmentsever.
On a slight cautionary note, it has been shownthat themanyoccupiers inMarinaBayareEuropedomiciled companies and many are financialinstitutions. In lightof theongoingEuro-debtcrisis,thereare concernsaroundoccupierdemand fromthese types of tenant. It is likely that thebanks, inparticular,willlargelystayoutofthemarketforofficespaceuntilsuchtimeaseconomicstabilityisrestored.ThegrowingtrendtowardsgreaterdiversityoftenantmixinMarinaBaymayhelpoffsettoadegree,buttheshorttermoutlookforleasingisfairlysoft.
Another challenge that Marina Bay may face isa function of its success and tremendous growth.Problemsassociatedwith thepaceofdevelopmentinclude traffic congestion; especially during peakhours will pose an escalating challenge if leftunresolved.MRTinfrastructurehasarguablylaggedbehind the opening up of this district with theDowntown line only scheduled to comeon line inlate2013.
TherearealsoworriesaroundtheadequacyofcarparkingintheCBD.Thisisofcoursebynaturetiedinto the car traffic congestiondebate. Shouldboththeresidentandworkpopulationcontinuetogrow,theseissuesmayneedsomefreshpolicyinitiatives.Lookingforward,however,MarinaBaycouldrepresentatruly“game-changing”opportunityforSingapore.Drawingparallels from the city-building simulationcomputer game, Sim City, the infrastructure, theconducive tax regime, themarket-ledapproach tourbanplanningandtimingatMarinaBayhaveallbeenfavourablyset.WewaitwithmuchanticipationthenextphaseofdevelopmentofMarinaBay-willMarina Bay deliver its full potential to transformSingaporeintoaworldwinningcity?
©2012CBREGroup,Inc.CBREstatisticscontainedhereinmayrepresentadifferentdatasetthanthatusedtogenerateNationalVacancyandAvailabilityIndexstatisticspublishedbyCBRE’sCorporateCommunicationsDepartmentorCBRE’sresearchandeconometricforecastingunit,CBRE—EconometricAdvisors.Informationhereinhasbeenobtainedfromsourcesbelievedreliable.Whilewedonotdoubtitsaccuracy,wehavenotverifieditandmakenoguarantee,warrantyorrepresentationaboutit.Itisyourresponsibilitytoindependentlyconfirmitsaccuracyandcompleteness.Anyprojections,opinions,assumptionsorestimatesusedareforexampleonlyanddonotrepresentthecurrentorfutureperformanceofthemarket.ThisinformationisdesignedexclusivelyforusebyCBREclients,andcannotbereproducedwithoutpriorwrittenpermissionofCBRE.
DESMOND SIMAssociateDirectorCBREResearchT:63261638E:[email protected]
Singapore Contacts:MORAY ARMSTRONGExecutiveDirectorOfficeServicesT:63261609E:[email protected]
PETRA BLAZKOVAHead,CBREResearchSingapore&SouthEastAsiaT:63261297E:[email protected]
