Developers take innovative approach to office supply

Developers are thinking of more "innovative" ways to deal with the growing supply of prime office space by redeveloping existing office buildings for other uses.

Notably, office space in Singapore's central business district (CBD) with a net lettable area (NLA) of around 1.4 million square feet is set to be removed for redevelopment into residential and commercial type projects over the next year or so.

And this trend is likely to continue especially amid a potential office supply glut situation in the CBD.

Already, developers have been up to their necks with the conversions of older office buildings into new strata projects comprising retail and residential offerings - such as Oxley Tower, Robinson Square and Eon Shenton - on the back of hot demand from buyers.

All that said, the quantum of existing office space that will be removed for redevelopment still remains somewhat negligible from a bigger picture perspective.

New supply and increasing secondary stock in the CBD Grade A space are still a concern going forward, particularly beyond a two-year horizon as sizeable tranches that are substantially yet to be pre-leased are set to hit the market sometime in 2015 to 2016.

Not surprisingly, vacancy rates have also crept up over the past year or so, with 1Q2012 numbers coming in at 6.5 per cent, almost twice that of the same period a year back (3.6 per cent). During the period of 2005 to 2006, vacancy rates were at 20%. Thus, the office market remains stable until it reaches the peak experienced in 2005 and 2006.

Source: Business Times – 13 July 2012