WeWork is all set to take the lease of 21 Collyer Quay from CapitaLand Commercial Trust. There is news of the US based co-working company taking lease of the entire 21-storey office building as the current lease HSBC is about to move out.
This would be in line of WeWork’s continued expansion in the Asian region. This would also be WeWork’s biggest office space in Singapore with its 200,000 square feet net lettable area.
CapitaLand Commercial Trust revealed that the lease would start from Q2, 2020 and has been signed for a seven-year period.
However, the company remained tight-lipped about the financial details of this lease agreement.
The current lease agreement with Hong Kong and Shanghai Banking Corp Ltd, a subsidiary of HSBC Holdings shall end in 2020 in the month of April.
CapitaLand also stated that the new deal with WeWork won’t have significant impact on the net asset value per unit and also on the distribution per unit for FY 2019.
The spokesperson for the company said that there are plans to use the occupancy downtime between the tenant’s changeover to carry out refurbishment work in the building.
The company would spend an estimated S$45 million on upgrade and the ROI on this would be approximately 9%. The spokesperson also added that the current value of the building as on June 30, 2019 stood at S$462.2 million.
The demand for co-working spaces has grown phenomenally in the last few years and they have found an interested community among start-ups.
These workspaces offer great amounts of flexibility over short-term leases as against traditional leasing of office spaces.
Offering great ambience inside and reducing the overhead costs, this model has been a huge hit in Singapore. Even large companies have been busy hiring co-working firms to take charge of managing their offices.
Colliers, the leading real estate consultancy said that co-working spaces now control 4% of Central Business District’s office space.
Since 2015 the footprint of co-working spaces Singapore has risen threefold.
Christine Li, Cushman and Wakefield’s Head of Singapore and Southeast Asia said that WeWork would gain signage rights in the financial district of the country after taking lease of this commercial property.
This is extremely rare with few office floors in the Central Business District being available due to high occupancy rate.
WeWork in a separate statement said that they would be occupying 20 floors in the building but they didn’t mention details regarding the remaining floor in this building.
Last year HSBC Singapore had informed about its decision to relocate the head office to CBD’s Marina Bay Financial Centre.
According to Ms Li, the rents for Grade-A office space in Central Business District saw a surge of 12.7% in 2018.
She forecast the rents to remain almost the same as last year where average rate was around the S$10.61 psf per month attributing this to slower growth owning to trade war between China and the United States.
WeWork which has completed a decade has its presence in 28 countries that with Asian locations including India and China besides Singapore.
The firm which filed for an IPO last year has constantly been losing money and many analysts have even raised questions about the business model and whether it can be sustained based on the firm’s long-term liabilities alongside its short-term revenue agreements.