ARA rides the Robinson Road renaissance
Covid or not, the rejuvenation of the CBD is underway. Nowhere is it more evident than along Robinson Road. On the stretch between Boon Tat Street and McCallum Street, office buildings have undergone ownership changes, refurbishments or redevelopment.
“Robinson Road is the centre of the ‘golden triangle’ bounded by Raffles Place, Marina Bay and Tanjong Pagar precincts,” says Stephen Tang, head of value-add/opportunistic real estate, ARA Private Funds at ARA Asset Management. He sees the CBD’s centre of gravity shifting towards the midpoint of Robinson Road.
That is what drew ARA to that part of Robinson Road, coupled with several other compelling factors: the rejuvenation of Tanjong Pagar, redevelopment of adjacent buildings along Robinson Road in recent years, and its proximity to four MRT lines.
ARA Real Estate Partners Asia II, a value-add fund under ARA Asset Management, paid $340 million for the former Robinson Centre at 61 Robinson Road in September 2019. ARA then embarked on asset enhancement initiatives (AEIs), which are scheduled for completion in the second half of this year.
61 Robinson is flanked by Robinson Point at 39 Robinson Road and Afro-Asia i-Mark Building. Singapore-listed real estate group Tuan Sing Holdings divested Robinson Point for $500 million last November. The buyer is said to be Vietnamese property group Viva Land Investment & Development Holdings. Meanwhile, the Afro-Asia i-Mark Building is a $320 million redevelopment of the former Afro-Asia Building by the Tan family of Afro-Asia Shipping Co and Japanese construction and real estate group Shimizu Corp. The building was completed in 2Q2021 and is over 70% leased to date.
Similar changes were seen at the block on Robinson Road between McCallum Street and Maxwell Road. The new 79 Robinson Road is a $1 billion redevelopment of the former CPF Building by CapitaLand. Next to it is 77 Robinson, which Gaw Capital Partners purchased for $710 million in a joint venture with Allianz Real Estate in 2019. That same year saw Sun Venture purchase the adjacent 71 Robinson Road for $655 million from a business unit of Commerz Bank.
Directly opposite 61 Robinson Road is a 12-storey office building at 108 Robinson Road: It was sold for $143 million to PGIM Real Estate, the real estate investment business of US global investment manager PGIM, in April this year.
“Many of these buildings along Robinson Road have been picked up by investors and those looking at redevelopment opportunities,” says Shaun Poh, head of capital markets at Cushman & Wakefield (C&W), who has brokered the sale of many of the commercial buildings along Robinson Road over the past decade.
The recent sale of Maxwell House on Maxwell Road and the exclusive due diligence by TE Capital Partners at PIL Building on Cecil Street have encouraged more owners of ageing assets to explore the potential of their buildings — whether for redevelopment, asset enhancements or a possible divestment, adds Poh. He is currently advising several such asset owners along both Robinson Road and Cecil Street.
Besides attracting property funds, private equity players and family offices, commercial buildings in the CBD have recently captured the interest of residential property developers exploring redevelopment opportunities under the CBD Incentive Scheme and other such schemes, observes Poh. The last conversion of a commercial building into a residential block at Robinson Road was VTB Building, which was acquired in 2009 and redeveloped into the 167unit Robinson Suites. Poh had brokered the sale.
As some of these buildings change hands, new owners see the opportunity to upgrade the buildings through AEI, notes Robert Cheng, founder and design principal of Brewin Design Office, which worked closely with ARA on the revamp of 61 Robinson. “I see Robinson Road taking on a new life,” says Cheng (see sidebar “61 Robinson’s contemporised Art Deco interiors”).
‘Higher-grade office building’
The original 20-storey office building at 61 Robinson was developed by the former First Capital Corp (now GuocoLand), and completed in 2000. “The building has good bones,” notes ARA’s Tang. Floorplates are entirely column-free, with
ceiling height of 3.5m and floor-to-ceiling windows. “These attributes set 61 Robinson apart even from newer office buildings,” he adds.
The office floorplates at 61 Robinson range from 7,000 to 9,000 sq ft. Therein lies one of the attractions of the building: “Floorplates of under 10,000 sq ft would cater to tenants with moderate size requirements and who would appreciate having a prominent presence in a unique and well-appointed office building,” says Tang. Examples of such discerning tenants include firms in asset and wealth management, financial services, technology and media industries.
As part of its overall AEI, ARA took the opportunity to transform 61 Robinson into “a higher-grade office building”. “In a post-Covid world, we expect that the quality of office space will matter even more to companies’ culture and identity, rather than simply offer a utilitarian place to get work done,” Tang adds.
His view is backed by property consultants’ findings. “Despite Covid-19 restrictions and concerns over the economy, many multinationals are taking a medium- to longer-term view for future growth and continue to plan ahead,” says office specialist Corporate Locations in its 3Q2021 market review, published on July 12. Leasing activity was boosted by displaced tenants from AXA Tower and Fuji Xerox Towers needing to find new space. “Surprisingly, many are taking the opportunity to upgrade to higher-quality space,” says Corporate Locations.
After five consecutive quarters of decline, CBD Grade-A rental growth turned positive in 2Q2021, says C&W in its July 5 report. Rents grew 0.5% q-o-q to reach $9.60 psf per month in 2Q2021, suggesting a possible turnaround in rents. Rental growth was driven by prime Grade-A office buildings as tenants embarked on a flight to quality. This is evident from C&W’s basket of Grade-A office properties in the CBD where prime Grade-A rents rose by 1.0% q-o-q in 2Q2021, while non-prime Grade-A office rents grew slightly by 0.1% q-o-q over the same quarter.
‘A touch of hospitality’
In repositioning 61 Robinson into a higher-grade office building, ARA decided “to infuse a touch of hospitality”. The revamped ground-floor reception will be more akin to that of a luxury boutique hotel, offering an arrival experience unlike any typical office building in Singapore, says ARA’s Tang. The hospitality-inspired, occupier experience will be carried through to the concierge, community management services, as well as a customised building occupier digital app and platform developed by ARA’s property management arm APM.
The main lobby will include 3,700 sq ft of street-fronting retail and F&B space. A new 8,000 to 10,000 sq ft “destination-oriented” retail space has been created to cater for lifestyle, wellness and medical concepts. Other new amenities include end-of-trip facilities on the ground floor, as well as shower facilities on every office floor.
The AEI at 61 Robinson extends beyond a mere facelift and upgrade of the lobby and common areas. The mechanical and electrical (M&E) as well as air-conditioning and mechanical ventilation (ACMV) systems will be upgraded. “Beyond achieving greater energy efficiency, we are taking the opportunity to install UV-C light filters in the air handling units on all the office floors so as to provide better air quality for all building occupants,” says Tang. “Given our strong focus on sustainability from an ESG [environmental, social and corporate governance] perspective, we have also received the BCA Green Mark Gold rating based on our planned updates.”
Throughout the asset enhancement period, the office floors at 61 Robinson continue to be occupied by existing tenants who were unaffected by the ongoing works. “We anticipate that certain tenants will naturally vacate the building to allow room for others,” adds Tang.
The enhanced building has naturally resulted in an uplift in asking rents at 61 Robinson, from $9 psf prior to the revamp to $10.50 psf today, notes Darren Ng, director of Corporate Locations.
“We are proud to have the new and improved 61 Robinson play a part in the rejuvenation of the CBD, offering unique hospitality-inspired office space as well as exciting new retail and lifestyle options in the CBD,” says ARA’s Tang. “We see 61 Robinson as an example of unlocking new value from ageing buildings in the CBD through a well-executed asset enhancement exercise, which is more environmentally sustainable and less disruptive to the surrounding community than a full redevelopment of the site.”
Office properties back in focus
A year ago, in the midst of the pandemic, there were some concerns about the structural shifts in the use of office space as working from home became the norm, says Steven Ming, managing partner and co-founder of Sakal Real Estate Partners. “In the last six months, despite shadow space emerging, we are seeing a steady backfill of office space with new to market tenants,” he adds. “This trend, along with deferred completion of new office schemes and supply withdrawal due to redevelopments, the outlook for the office market has turned promising.”
Indeed, Ming sees “a big wall of capital ready to be deployed in real estate; and office properties are in focus”.
The CBD Incentive and Strategic Development Incentive schemes, introduced in 2019 with the aim of encouraging the redevelopment of older office buildings into mixed-use projects, have become even more pertinent and timely with flexible working trends, says Catherine He, CBRE director of research for Southeast Asia. Since the announcement of these schemes, office transaction values have increased from 6% of investment sales in 1Q2020 to 24.2% of total investment sales in 1Q2021. “This is likely motivated by the anticipated rental recovery, and redevelopment potential of some major assets,” says He.
The resurgence in office sales underscores the stability and “safe haven” reputation of Singapore, further attracting global firms to set up a base here, says CBRE. “This provides support for office space demand and gives investors long term confidence in the local office sector,” notes He.
ARA is an example of just such an investor. “We definitely continue to see, and are exploring similar opportunities in the Singapore CBD, where we can add value to existing assets by executing thoughtful AEIs,” says Tang.