UOL’s SingLand to Redevelop Clifford Centre at Raffles Place as Rents Rise

Singapore Land Group (SingLand) announced Thursday that it has received provisional approval to refurbish its Raffles Place headquarters into a new building which could reach as high as 50 storeys, as office rents continue to rise in the city-state’s central business district.

The listed unit of UOL Group said it obtained the approval from Singapore’s Urban Redevelopment Authority for the redevelopment of the 29-storey Clifford Centre in the first quarter and plans to commence the project early in 2023, once all necessary permits are finalised.

The recent provisional approval is for roughly 492,000 square feet (45,708 square metres) of gross floor area for offices and 52,000 square feet for retail space, the Business Times reported Thursday, adding that the combined gross floor area of 544,000 square feet will be 36 percent more than the property’s current gross floor area.

“The existing Clifford Centre sits in an extremely prime location,” said Galven Tan, deputy managing director for investment sales and capital markets at Savills Singapore. “The redeveloped building will enjoy unobstructed views of the Marina Bay area and beyond. As the redevelopment is likely to be completed in about five years’ time, it will be able to capitalise on the lack of supply in the office market on the horizon.”

Raffles Place Makeover

The 29-storey Clifford Centre at 24 Raffles Place features retail and office components and had a capital value of S$581 million ($422.9 million) as of 31 December, according to SingLand’s annual report for 2021.

The building sits on a 3,343 square metre (35,984 square foot) site, with a 999-year lease that started in 1826. Completed in 1977, the existing property has a net lettable area of 279,000 square feet and includes 268 parking lots, according to its website.

Under the URA’s Master Plan 2019, a redeveloped 24 Raffles Place could reach as high as 50 storeys at a gross plot ratio of 15.

“Redevelopment of older office buildings, by upgrading to the most modern and efficient specifications, future-proofs the property and improves the rentability, and thus the capital value of the property,” said Tricia Song, head of research for Southeast Asia at CBRE.

Song noted that “the rising rents, flight to quality trends, and potential to unlock value with incremental net lettable space, has likely driven some developers to undertake the redevelopments”.

“In particular, newer buildings with greener credentials would be preferred by most occupiers,” she said.

In 2019, AEW purchased Chevon House, which sits adjacent to the Clifford Centre, from Oxley Holdings for S$1.03 billion, in a deal which involved Oxley first finding a buyer for the retail podium. That transaction also involved substantial enhancements to the 32-storey tower to bring it in line with contemporary occupier requirements.

In 2020, SingLand installed new amenities and made other enhancements to the building. As of 31 December, Clifford Centre had an 89 percent committed occupancy with current tenants including law firm Donaldson & Burkinshaw, HLB Singapore, Mitsubishi Gas Chemical Singapore, Newgate Communications, Hankook Tire Singapore and Asia Reinsurance Brokers.

Setting Up for Higher Rents

Local listings currently advertise office space in the Clifford Centre, which connects directly to Raffles Place MRT at from S$8 to S$9 per square foot per month,  while a report from property consultancy Knight Frank last month put average rents in Raffles Place and Marina Bay at S$10.25 per square foot per month after a third straight quarter of increases.

According to the URA’s first-quarter 2022 real estate statistics released on 22 April, average rents for office space across Singapore rose by 1.6 percent on average in the first quarter of the year compared with the previous three months. Vacancy rate within that period was unchanged at 12.8 percent.

SingLand’s plan to redevelop Clifford Centre comes at a time when office rents across the nation are expected to rise. “The office market is poised to enjoy further strong growth,” Tan said, adding that “given the relative lack of development sites in the CBD, coupled with expected continued growth from the tech sector and Singapore’s position as a regional business hub, the outlook on the office market is strong”.

In separate notes in response to the URA’s data, Colliers and CBRE both said rents would likely increase for Singapore offices, particularly for premium and Grade A spaces in the CBD.

According to Colliers, high-quality offices like those in core locations will be the likely beneficiaries when potential tenants become more selective in choosing their next space. Meanwhile, CBRE said it anticipates rents to rise by 6.9 percent for full-year 2022, as office demand climbs in line with the relaxation of workplace measures and further increases in leasing enquiries.

Cushman & Wakefield also expects rents to continue growing in the CBD office market, driven by flight to quality. The firm said the healthy appetite of tech and finance firms will continue to support demand in the area, mitigating the potential impacts of economic uncertainties such as the Ukraine-Russia conflict and rising inflation.

Keeping Up with New Supply

As of 31 March, there was 834,000 square metres of gross floor area in the nation’s office supply pipeline. Over the remaining months of 2022, 69,000 square metres of space is expected to be added to the pipeline.

By the time Clifford Centre’s redevelopment commences in 2023, another 227,000 square metres will be added to the pipeline, according to the URA. Colliers said vacancy rates could tighten in the future before this new supply is added to the market.

“There will be some marginal increase in the lettable space in office space,” CBRE’s Song said. “In general, owners can benefit from deriving higher rents after the redevelopments from more efficient specifications, green credentials and potentially better tenant covenants/profile.”