Complete Property Market Updates of Singapore

June 24, 2008

Govt agencies asked to tighten CBD space usage

Filed under: Agency News,Commercial,General — Propertymarketupdates @ 3:01 am

New exercise targets efficient use to free up more space for private sector

GOVERNMENT agencies in the Central Business District have been told to re-evaluate their office space needs in light of the current office space crunch, even if these agencies own their buildings.

It is understood that the Ministry of Finance (MOF), which oversees all government office relocation projects for government ministries and statutory boards, has recently issued a directive asking these government bodies to look into the possibility of compacting their offices.

Asked to comment, a spokesman for MOF said: ‘MOF and MND (Ministry of National Development) are working with government agencies to make more efficient use of office space. This is part of the government’s effort to better manage its resources.’

While MOF did not reveal to what extent this exercise is being undertaken, it is expected to be on top of the 20,000 sq m of office space that Finance Minister Tharman Shanmugaratnam said the government would free up in February.

The Urban Redevelopment Authority (URA) for one, has confirmed that it is indeed looking at compacting its office space at the URA Centre on Maxwell Road to make space available to the private sector.

A spokeswoman for URA said: ‘We will be consolidating our office space to achieve greater space efficiency. We are still reviewing and are unable to say at this stage how much space can be freed up for rental.’

URA also said that it expects the consolidation to be completed by 2009/2010.

This latest exercise is a slight departure from earlier government office space crunch measures in that the agencies involved are not expected to move out of the CBD.

As such, URA will not be following the Singapore Land Authority (SLA) to Revenue House at Novena. Nor will it be following the Economic Development Board (EDB) to Fusionopolis at one-north in Buona Vista.

‘All the URA divisions will be staying at The URA Centre,’ added its spokeswoman.

But while SLA and EDB – currently located at Temasek Tower and Raffles City respectively – do not own their offices, URA does.

The 16-storey URA Centre, which was opened in 1999, was designed by Kenzo Tange Associates at a cost of $118.9 million.

And it could now prove to be a generator of considerable rental revenue.

Cushman and Wakefield managing director Donald Han says that rents at nearby Capital Tower and Temasek Tower are currently $16-$18 and $12-$13 psf per month respectively.

Prime office space is a luxury these days and Mr Han reckons that government bodies that occupy space in the CBD, may need to ‘justify’ their occupation of the space, even if they own it.

It is not known what the efficiency of office space at government-owned buildings such as URA Centre is but Mr Han says anything above 150 sq ft per person, ‘is a luxury’.

‘The industry standard in the private sector is between 80-130 sq ft per person,’ he explained, adding that cutting space usage by 50 sq ft per person and improving ‘operational efficiency’ could amount to quite a lot of new, leasable space, especially at today’s rates.

Colliers International director (research and advisory) Tay Huey Ying also believes that the MOF directive could be revenue driven rather than just a move to help ease the office space crunch.

As Ms Tay points out, the URA and other government bodies do pay rent even if they own their own buildings. But it is not known what rent they pay. ‘The rents could be tied to market rates but it could also depend on the accounting system,’ she added.

Ms Tay nevertheless lauds the move. ‘At this point in time, any freeing up of space will help the supply crunch,’ she said.

Interestingly, Mr Han believes that with the announcement of new growth areas in the Draft Master Plan 2008, even more government agencies could be moving out of the CDB, if only to help kick-start these areas.

‘To be a catalyst in these areas, it cannot be left to the private sector because the lack of amenities will mean land prices in initial land sales sites will be low and this could lead to price distortions,’ he explained.

Source : Business Times – 27 May 2008

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