Tag Archives: Office Rental

Singapore’s office rental market expected to go up

Singapore’s office rental market is on the rebound after bottoming out in the last quarter of 2012, according to Cushman & Wakefield.

In its quarterly office market report, the real estate firm said rents are on the rise and vacancies are drying up, though not all office buildings are sharing the comeback.

Cushman & Wakefield’s latest office market report showed that the average rent in prime Grade A locations was up 4.2 per cent in the second quarter, from a quarter earlier, hitting S$9.03 a square foot per month.

That was up from S$8.99 per square foot per month in the first quarter of this year.

Sigrid Zialcita, managing director of research for the Asia Pacific at Cushman & Wakefield, said: “We are expecting rents to go up across the board on the back of very solid demand.

“We’re not going to see the spikes we’ve seen in the 2007-2008 time frame, where rents went as high as S$18-S$19 a foot.”

The report showed that all the CBD submarkets saw average rents appreciate, with Marina Bay and Shenton Way seeing a 9 per cent rise in rents. In the fringe area, Orchard Road’s average rents moved up by around 4.6 per cent quarter-on-quarter.

The average rent in the suburban submarket rose slightly — by 1.3 per cent quarter-on-quarter — to S$5.64 psf per month.

Vacancy rates for Grade A office space is also improving — dropping to 3.7 per cent in the second quarter from 5.0 per cent in the first quarter.

Vacancies at Marina Bay shrank to 3.6 per cent in Q2, from 5.6 per cent a quarter ago and 12.1 per cent a year ago. Raffles Place had an overall vacancy rate of 5.5 per cent, while Shenton Way’s vacancy rate stood at 4.9 per cent.

Experts said diversity in the tenant pool has helped fill the office space.

“Long gone are purely financial institutions,” said Desmond Sim, associate director of CBRE Research. “You have complimentary services like insurance, you’ve got legal all coming in to take up Grade A stock within Marina Bay and Raffles Place.”

Also helping the office rental market is the limited new supply coming to the market.

Mr Sim said: “This year, we have the Asia Square Tower II coming on stream. Next year, we have CapitaGreen that will come on stream. Then we actually have a break of no Grade A product coming in 2015.

“So if someone is trying to take advantage of the current low Grade A rents, they might realize the Grade A stock coming online is quite limited.”

One place where vacancies are not falling is in the suburbs, where vacancies are expected to rise to over 8 per cent through 2014.

The suburban vacancy rate was 2.7 per cent in 2012, and is expected to rise to 6.0 per cent this year and hit 8.2 per cent in 2014.

Sigrid Zialcita said: “In the suburbs, we’re going to see some massive projects delivered and add space, but again we don’t think it’s a huge concern for the market because the take up we’ve seen has been brisk, and going forward we see very healthy leasing occurring in this properties.”

There will be more options, but not necessarily better prices, as experts said despite rising vacancies, rental rates in the suburbs will remain stable at around S$5.50 per square foot this year to 2014.

Source – CNA – 26 Jun 2013

Rents of prime office space set to rebound by end-2012

Renting prime office spaces in the Central Business District (CBD) has been getting cheaper since the third quarter of 2011. However, landlords need not fret any further. Experts said the Grade A office market will soon reach its bottom by the end of 2012.

Without new office space in the CBD being injected in the second quarter of 2012, landlords have much to cheer. Analysts said this will stem the decline in office rents and may even cause a rebound.

However, they added that any rebound would be mild and do not expect prices to return to levels seen in early 2011 just yet.

Grade A office rents in Marina Bay, Raffles Place and Shenton Way were going for an average of S$10.33 per square foot (psf) per month in the third quarter of 2011 before the decline started.

Nicholas Holt, Research Director (Asia Pacific) with Knight Frank, said: “From the top of the market, which was over S$18, it went down to maybe S$8 now it’s maybe stabilised at S$9 or S$10. We are probably not going to see more softening, or maybe some gentle softening.

“But as some of the new supply gets absorbed, the thing is landlords get nervous when they are sitting on empty space. So maybe they drop their rents. But we feel that it is not going to go down much further below the levels than they are now.”

Property consultancy firm Cushman and Wakefield said rents for prime grade-A space in Marina Bay slipped another seven per cent this quarter, to S$10.40 psf a month, while in Raffles Place, the dip was three per cent to S$9.20 psf per month.

But office rents in the suburbs remained unchanged at S$5.05 psf.

This is according to Cushman and Wakefield’s latest Q2 MarketBeat report released on Friday.

Sigrid Zialcita, managing director of Cushman & Wakefield Research Asia Pacific, said: “For CBD, it’s more like bottoming out. We expect rents to be growing faster for non-CBD markets.

“And next year, the CBD market will have the ability to push rates because conditions could be better. Rates could go back up to two to three per cent or even more.”

Experts said that the global economic uncertainty will deter businesses from expanding and taking up more office space. But some analysts predict any meaningful recovery in economic growth above their forecasts of 2.1 per cent growth this year should drive the take-up rate and rents across the island.

Unlike the CBD, supply in office space in the suburbs may not grow fast enough to meet demand. Analysts said this means rent increases in the city outskirts will likely be faster than in the CBD.

Source : CNA – 2012 Jun 29