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Grade A Office Buildings in Singapore: Long-Term Investment Asset

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In the ever-evolving landscape of real estate investment opportunities, Grade A office buildings in Singapore emerge as a compelling and sought-after alternative asset class that demands the attention of discerning high-net-worth individuals and investors. Against the backdrop of recent regulatory changes, such as the increased Additional Buyer’s Stamp Duty (ABSD) rates implemented in April 2023, astute investors are gazing at the allure of luxury real estate and the global property markets.

The office market in Singapore is characterized by supply constraints, with more than 95% of the space not available for individual unit purchases (strata). Iconic buildings like Marina Bay Financial Centre, Raffles Place, Tanjong Pagar, Asia Square, Republic Plaza, and UIC Building do not offer strata units. These buildings can only be rented, not bought.

Singapore, known for its thriving business environment and robust economy, has long attracted investors seeking lucrative opportunities. With the recent revision of ABSD rates, which now stand at 60% for foreigners and 65% for entities and trusts, the residential property market has faced increased challenges. This shift has paved the way for investors to explore new avenues, such as Grade A commercial office spaces, as a gateway to long-term wealth preservation and portfolio diversification.

International Plaza Commercial Properties exterior
Commercial Property for Sale: International Plaza at 10 Anson Road, S079903 | 1,453 sqft | $3,150,000

There are only six Grade A buildings available for purchase in Singapore. These buildings offer strata spaces, such as Prudential Tower, Suntec City, Samsung Hub, Plus Building, SBF Center, and Oxley Tower. However, most older buildings fall into the Grade B category, including International Plaza, Shenton House, Maxwell House, Robinson Square, and newer additions like Eon Shenton and Oxley Tower.

In this second article in our series on commercial properties in Singapore, we delve head-on into the intricate world of Grade A commercial office investments. 

Allure of Grade A Commercial Office Spaces

Grade A office buildings embody the pinnacle in Singapore’s commercial property sector. 

A PropNex report indicated the top transaction in Q1 2023 was the $14.95 million sale of three office units on the 7th floor of the 99-year leasehold Grade A commercial building, PLUS in the CBD. The sale price reflected a unit price of $2,955 per square foot (psf)  against a floor area of 5,095 square feet. 

PLUS Singapore Commercial Properties exterior
Commercial Property for Sale: PLUS, 20 Cecil Street, S049705 | 768 – 11,216 sqft | From $2.44 million

In District 1, the highly sought-after CBD and financial district that includes Raffles Place, Marina Bay and Tanjong Pagar boast premium locations. Here’s a list of Grade A buildings:

Office NameAddresses
18 Robinson Road18 Robinson Road, Singapore 048547
20 Collyer Quay20 Collyer Quay Singapore 049319
30 Raffles Place30 Raffles Place Singapore 048622
61 Robinson61 Robinson Road, Singapore 068893
71 Robinson Road71 Robinson Road, Singapore 068895
79 Robinson Road79 Robinson Road, Singapore 068897
ASB Tower79 Robinson Road, Singapore 068897
Asia Square Towers8 Marina View, Singapore 018960
Bank Of Singapore Centre63, Market Street, Singapore 048942
CapitaGreen168 Robinson Road, Singapore 068912
Capital Tower168 Robinson Road Singapore 068912
CapitaSpring50 Market Street Singapore 048940
Centennial Tower3 Temasek Avenue, Singapore 039190
Chevron House30 Raffles Place Singapore 048622
Fraser Tower182 Cecil St, Singapore 069547
IOI Central Boulevard Towers2 Central Boulevard, Singapore 018916
Marina Bay Financial Centre8, 10, 12 Marina Boulevard, Singapore 018981
Marina One Office Towers7 & 9 Central Boulevard Singapore 018936
Maybank Tower2 Battery Road, Singapore 049907
Millenia Tower1 Temasek Avenue, Singapore 039192
MYP Centre9 Battery Road Singapore 049910
Ocean Financial Centre10 Collyer Quay, Singapore 049315
One George Street1 George Street, Singapore 049145
One Marina Boulevard1 Marina Boulevard Singapore 018989
One Raffles Place1 Raffles Place, Singapore 048616
One Raffles Quay1 Raffles Quay, Singapore 048583
OUE Bayfront50 Collyer Quay, Singapore S049321
PLUS20 Cecil Street, Singapore 049705
Prudential Tower30 Cecil Street, Singapore 049712
Republic Plaza9 Raffles Place, Singapore 048619
Samsung Hub3 Church Street, Singapore 049483
Six Battery Road6 Battery Road, Singapore 049909
Suntec City Towers5, 6, 7, 8 & 9 Temasek Boulevard, (S) 038989
Tokio Marine Centre20 Mccallum Street Singapore 069046
UIC Building5 Shenton Way, Singapore 068808
UOB Plaza80 Raffles Place, Singapore 048624

These premier properties, strategically located in prime business districts and the city fringes, offer many compelling advantages for investors. From prestigious addresses to state-of-the-art facilities and sustainable architectural design, investing in Grade A office buildings in Singapore provides many benefits beyond their aesthetic appeal. 

Serving as a robust income-generating asset class, these properties have the potential for long-term capital appreciation. During the quarter, no building sales were recorded based on URA caveat data, but it is worth noting that a significant transaction took place without any lodgements. The 12th floor of the upcoming development, Solitaire on Cecil, was reportedly sold for $52.3 million, making it the largest deal in terms of quantum in 2023. The transaction amounted to approximately $4,196 per square foot based on the strata area.

Singapore’s Core CBD Steers Office Rental Market in 2023

Grade A properties command the highest rents and are usually occupied by prestigious tenants with above-average rental rates. According to CBRE, in 2023, modest rental growth led by Core Central Business District (CBD) Grade A office buildings with vacancies inching down further to 3.9% in Q1 2023 from 4.2% in Q4 2022 as supply remained tight.

Grade A properties, known for their exceptional quality and prime locations, attract top tenants who are willing to pay above-average rental rates. CBRE’s office market research reveals that Singapore’s Core CBD Grade A office buildings are expected to experience modest rental growth while vacancy rates have decreased. In Q1 2023, vacancies in the Core CBD dropped to 3.9%, down from 4.2% in Q4 2022, as the limited supply continued contributing to a tight market.

Capital Square Commercial Properties exterior
Commercial Property for Lease: Capital Square, 23 Church Street, S049481 | 3,993 sqft | $47,916 per month

Robust leasing activity in the Singapore office market remains strong, driven by professional services, FMCG, and government agencies, despite subdued tech industry demand. In economic slowdowns and recessions, Grade A buildings often demonstrate greater resilience due to their ability to attract tenants from Grade B offices at comparable rental rates.

The availability of such spaces provides opportunities for occupiers looking to upgrade, as high-quality office spaces have traditionally been scarce. Tenants interested in reducing their footprint for a hybrid workplace model can seize this opportunity to upgrade to smaller yet superior premises with low vacancy rates, appealing to small- to mid-sized enterprises.

In the first quarter, median monthly rentals in the Central Area surged to $7.16 per square foot (psf), reflecting a notable growth trend. Similarly, office spaces in the Fringe area experienced an increase in rental rates, reaching $5.29 psf during the same period. Rental data indicates that rents in the Outside Central Region also experienced a slight uptick, reaching $4.60 psf in Q1.

The limited number of office completions during the quarter played a significant role in maintaining stable occupancies and driving rental growth, particularly in the CBD Grade A office space segment. 

LocationMedian Rental ($psf pm)QOQ%
Anson/Cecil$7.0314.3%
Marina Boulevard / Marina View$13.2012.0%
Fringe area$5.299.5%
Raffles Place$10.171.1%
City Hall$6.51-1.4%

In today’s evolving market, it is essential for individuals and businesses seeking office spaces to stay informed about median rental rates and industry trends. Accessing the Urban Redevelopment Authority’s (URA) website and its extensive database provides stakeholders with valuable insights into the median rental of office spaces, enabling them to make informed decisions when it comes to commercial investment properties.

The scarcity of prime office spaces and robust demand drive rental rates upwards, resulting in attractive rental yields. 

Mitigating Risk: Key Considerations for Investors

Grade A commercial office investments in Singapore present untapped potential for local and foreign investors.

Capital Square Commercial Properties exterior
Commercial Property for Sale: Solitaire on Cecil at 148 Cecil Street, S069545

While Grade A commercial office investments offer lucrative prospects, investors need to navigate the market with prudence and diligence. Here are vital considerations to mitigate risk:

Thorough Due Diligence: Conducting comprehensive due diligence is crucial to evaluating the property’s financials, lease agreements, tenant profiles, and potential risks. Engaging experienced professionals and leveraging their expertise ensures informed investment decisions.

Long-Term Lease Agreements: Investing in commercial office spaces with long-term lease agreements provides stability and minimises tenant turnover risks. Examining lease terms, tenant creditworthiness, and lease renewal clauses is paramount.

Economic Fundamentals: Keeping a pulse on Singapore’s economic indicators, market trends, and government initiatives helps investors make data-driven decisions and identify emerging opportunities.

Expert Guidance: Collaborating with reputable real estate advisors with in-depth market knowledge and a track record of successful commercial property investments is invaluable. Their insights and guidance enhance the investment process and optimise returns.

Regulatory Landscape and Tax Considerations Understanding the regulatory framework and tax implications is essential for commercial office investors. Singapore’s investor-friendly policies, transparent legal system, and attractive tax regime make it an appealing investment destination. However, seeking professional advice from tax experts and legal advisors is crucial to ensure compliance and optimise tax efficiency.

Singapore’s Thriving Commercial Real Estate Market

The demand for premium office spaces remains strong, driven by multinational corporations, financial institutions, and high-growth industries that seek to establish their presence in Singapore’s thriving business hub. Moreover, Grade A office spaces offer unparalleled diversification and risk mitigation opportunities. As part of a well-rounded investment portfolio, these properties provide stability and resilience, even during market volatility. Their solid rental yields and occupancy rates contribute to a stable income stream, further bolstering their appeal as an attractive investment proposition.

The Central Commercial Properties exterior
Commercial Property for Sale: The Central, 8 Eu Tong Sen Street, S059818 | 872 sqft | $2.5 million

According to PropNex Research, in 2022, Singapore attracted a record $22.5 billion in fixed asset investments. This is a good sign that Singapore continues to be a highly attractive destination for companies, given its business-friendly policies and ease of connection across the region. 

Further, the supply in the pipeline of new development and redevelopment projects for office spaces is set to increase almost fourfold to 837,000 square metres (sqm) in total by 2027, up from the current 178,000 sqm under construction this year, indicating strong tailwinds backed by government actions.

Singapore Luxury Homes (SLH), with a remarkable sales record of $2 billion and a diverse portfolio spanning office, restaurant, hospitality, industrial spaces and luxury residential, is uniquely positioned to guide and support investors throughout their commercial real estate journey to best suit their investment needs.

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