ACTIVITY in the office market looks set to continue. The Singapore Land Authority (SLA) yesterday launched The Atrium @ Orchard with a fresh 99-year lease and a price tag above $2,700 per square foot.
Separately, CapitaLand and the National University of Singapore are said to have signed a deal to sell the 999-year leasehold Hitachi Tower at Collyer Quay for about $3,000 psf.
SLA is selling The Atrium @ Orchard, which is directly linked to the Dhoby Ghaut MRT station, through an expression-of-interest exercise. This is being handled by CB Richard Ellis (CBRE), which was appointed last year as the sole marketing consultant for the property.
'We expect bids above $2,700 psf on the net lettable area to be received,' CBRE executive director of investment properties Jeremy Lake said in an SLA statement yesterday.
'There is pent-up demand for Grade A office assets from foreign and local investors. The absence of new office supply coming up in Orchard Road will fuel rental growth.'
The property will be sold with a fresh 99-year lease that starts in mid-2008. CBRE's price expectation is benchmarked against the $2,700 psf achieved last year for One George Street, on a site with a 99-year leasehold tenure from January 2003.
'The two properties are of similar quality, though in different locations,' Mr Lake said yesterday when contacted.
The Atrium @ Orchard, completed in 2002, comprises two office towers of seven and 10 storeys each, with ground-floor retail space. It has a net floor area of 372,650 sq ft, so the price tag of $2,700-plus psf translates into a total price of over $1 billion. The property is fully occupied. Anchor tenants include Temasek Holdings, Barclays Capital and MTV Asia.
This is the first sale of a Grade A prime commercial building by the state. The expression-of-interest exercise closes on Feb 22.
Over in the financial district, the sale of Hitachi Tower for around $3,000 psf is said to have finally been sealed recently. BT understands that the buyer is a Goldman Sachs fund. Goldman Sachs bought the next-door Chevron House, formerly known as Caltex House, for $2,780 psf in August last year. Chevron House is on a site that had a remaining lease of 81 years at the time of the transaction.
Hitachi Tower has a better orientation. Another important difference between the two buildings is that in Chevron House, major tenant Chevron's rent is capped, which limits the near-term rental upside that the new owner can achieve, according to earlier BT reports.
The $3,000 psf price achieved for the 37-storey Hitachi Tower is a record for an entire office block.