More CBD office buildings may be converted to serviced residences developments

More CBD office buildings may be converted to serviced residences developments
By Matthias Chan, Channel NewsAsia

SINGAPORE: Some three to five CBD office buildings could be redeveloped into serviced residences, say some consultants.

Because there are hardly any such properties in the financial area, they believe that average room rates could be some 20 percent higher than other prime serviced apartments.

Earlier this month, serviced residences operator Ascott bought Asia Insurance Building along Shenton Way with the view of redeveloping it into serviced residences.

Some consultants believe this could kick-start a new trend for old offices in the vicinity.

"At the moment, there are quite a handful of office buildings that could potentially be converted to serviced apartments. But we must also bear in mind that there are a few office buildings which were earlier earmarked to be redeveloped into residential developments. So far that has not taken place. One of the reasons is because the office property market has recovered so well and rentals have gone up so strongly that owners are basically putting some of these plans on the back-burner," said Nicholas Mak, Director of Research, Knight Frank.

Consultants say these serviced apartments could fetch a marked premium in room rates.

As more business travellers gather in the CBD after the opening of One Raffles Quay and the Business and Financial Centre, some consultants believe that these services residences could charge as much as 20 percent more than other prime service apartments.

Because these properties serve predominantly business travellers, another way to improve yield is to configure these service apartments into smaller rooms.

However, these expected conversions are not likely to have an impact on the office sector.

"In the short term, we will see a tightening in the supply of office space as some of these office buildings are redeveloped into other uses. But in a couple of years time, we are going to see a massive amount of office space coming on-stream with the completion of the BFC so in the medium and long term, this current conversion is going to be negligible in the big picture," said Mr Mak.

Another nearby office project, One Raffles Quay is expected to be completed by the end of this year. - CNA /dt

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