Office REITs shift to the OCR as tenants hunt for cheaper rents

Are they leaving the CBD?

According to Maybank Kim Eng, the impact of office supply from Outside Central Region (OCR) on CBD rentals should not be ignored.

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We cannot rule out the possibility of high-quality decentralised developments like Westgate Tower in Jurong, Mapletree Business City Phase 1 at Pasir Panjang Road and The Metropolis at Buona Vista drawing tenants (albeit smaller floor-plate at times) away from CBD office buildings.

Already, Mapletree Business City has attracted big names such as Deutsche Bank, HSBC, Credit Agricole,Unilever, Nike, Toshiba and Samsung Asia, while potential tenants at The Metropolis include Shell, NOL, Procter & Gamble and GlaxoSmithKline.

And within the CBD, a hollowing out could occur when tenants exit buildings earmarked for en bloc redevelopment (possibly The Arcade at Raffles Place in the near term), sparking further substantial declines in Grade B office rentals.