Tag Archives: Office Rental

The Singapore office property market appears to be bottoming out and the trend of falling rents is stabilising, according to data from consultants Jones Lang Lasalle.

This is even though its preliminary estimate of average Prime Grade A gross effective rent in the central business district declined marginally by 0.6 per cent on quarter to S$7.75 per square foot per month in the first quarter.

Office rents have been on a declining trend since the third quarter of 2008.

Jones Lang LaSalle said the return of market activity from the fourth quarter last year continued to be instrumental in bringing rentals closer to their bottom.

Most landlords in the market were able to maintain their rentals.

In terms of demand, Jones Lang LaSalle said vacancy has dropped in the first quarter of this year in several key market segments.

These include Prime Grade A offices where the vacancy rate dropped from about four per cent in the fourth quarter last year, to about three per cent in the first quarter of 2010.

These mostly resulted from the success of prominent Prime Grade A office buildings such as Republic Plaza, UOB Plaza 1, Capital Square and One George Street in terms of securing tenants and reducing vacancies.

Going forward, the consultant said with the potential oversupply of office space and increased competition amongst landlords, the high end segment of the office market will be able to command premium over existing older buildings as demand finally returns to the market.

Source : Channel NewsAsia – 24 Mar 2010

The upswing in office leasing deals that started around July last year shows no signs of letting up. The healthy demand has persuaded some property consultants that rents for the best quality space in Singapore’s financial district could be close to their bottom and poised to perk up.

The Infocomm Development Authority (IDA) is understood to have inked a lease for about 160,000 square feet at Mapletree Business City on Pasir Panjang Road.

This is said to be spread over six floors in the 18-storey office tower of the development, which is expected to receive Temporary Occupation Permit (TOP) soon. With IDA secured as a tenant, the tower’s 436,300 sq ft net lettable space is now fully leased, BT understands. The project is near Labrador Park MRT Station, which opens next year.

IDA is expected to move out of Suntec City, where its lease is said to be expiring next year.

Barclays Capital, which has leased 100,000 sq ft at Marina Bay Financial Centre’s Tower 2, is said to be close to inking a deal for another 250,000 sq ft in the same tower, which is expected to receive TOP next quarter. The bank is expected to exit from Atrium @ Orchard.

Barclays also occupies about 100,000 sq ft at One Raffles Quay’s South Tower and its retail bank has a technology centre at Eightrium @ Changi Business Park. The bank’s headcount in Singapore has increased from just several hundred people in 2004 to over 3,500 currently. Of these, about 2,000 are employed at Barclays Capital Global Support Hub.

As new office projects are rolled out, big tenants such as banks are being offered more choices. For instance, ANZ, which is currently at OUB Centre at 1 Raffles Place, is said to be deciding whether to move to the new tower being built in the same development, or to Ocean Financial Centre along Collyer Quay.

The latter, a 43-storey development under construction that will have about 850,000 sq ft net lettable area, is also said to have attracted some tenants from Ocean Towers next door. These include Ifast, Verizon Communications and DMG & Partners Securities.

Other tenants at Ocean Financial Centre are said to include Stamford Law Corporation, which is currently in Republic Plaza, and serviced office operator The Executive Centre.

Colliers International executive director Calvin Yeo said: ‘We are starting to see our clients, who are MNCs including financial institutions, planning for expansion as their existing leases approach expiry.’

While some of the initial buzz in the office leasing market was a game of musical chairs involving relocating from older buildings to newer properties, the market is now starting to move beyond replacement demand to actual expansion or new demand, say market watchers.

‘We’re seeing quite a few law firms from Europe coming to Singapore as well as existing law firms in Singapore expanding,’ says Jones Lang LaSalle regional director and head of markets Chris Archibold.

‘Insurance companies are starting to look at headcount growth of about 5 per cent this year followed by a further 5-10 per cent per annum for the next few years. Banks are boosting their headcount, not just for private banking but across the board. We’re seeing a number of them bringing high-end back-office support functions again to Singapore,’ he added.

Mr Archibold reckons that for international standard prime Grade A offices in the Raffles Place and Marina Bay area, rents will probably bottom out at their current levels of about $8 psf a month for smaller occupiers and $7 psf for bigger occupiers. These levels are about 58 per cent below the Q3 2008 peak figures. ‘However, rents for A- and B+ grade offices may still decline a few per cent from current levels though the drop should end by Q4 2010.’

Another office property consultant also said that office landlords are more confident and not prepared to discount rents any further. ‘But older buildings may relatively underperform and that means rentals in even good-quality buildings may not rebound quickly until space availability in new developments tightens,’ he added.

Others are more optimistic. UBS has predicted a 30 per cent jump in the average monthly Grade A office rental value from $8.10 psf at the end of last year to $10.60 psf at end-2010, citing growth in demand. The impact of new office completions is not likely to be as grave as feared earlier since some one million sq ft of existing office stock is expected to be removed in 2010-2011 for conversion to residential use.

Source : Business Times – 3 Mar 2010