FALLS in commercial rents in the Shenton, City Hall and Orchard areas are levelling off, going by mid-fourth quarter figures from Cushman & Wakefield.
The property consultancy found that in the first six weeks of Q4, monthly prime office rents in the Shenton market fell just 0.8 per cent to $5.99 per sq ft (psf) from $6.04 psf in Q3. This decline is much smaller than with the 10 per cent plunge between Q2 and Q3.
Rents held up relatively well even though the Shenton market had a double-digit vacancy rate as new space from buildings such as Mapletree Anson and 71 Robinson came onstream.
There is ‘landlord reluctance to lower rents amid signs of improving office space absorption’, Cushman & Wakefield said.
According to the Urban Redevelopment Authority last month, take-up of office space turned positive in Q3 after staying negative for three consecutive quarters.
In the City Hall area, monthly prime office rents are also flattening – they dipped just 0.4 per cent to $6.77 psf from $6.80 psf in Q3. This was a big improvement from the 5.4 per cent drop between Q2 and Q3.
Over at Orchard, prime office rents remained relatively stable at $6.89 psf, down marginally from $6.90 psf in Q3. Rents in this market fell 6.3 per cent between Q2 and Q3.
Both the City Hall and Orchard markets have low single-digit office vacancy rates. Cushman & Wakefield research director Ang Choon Beng said lease renewal in these areas has been fairly stable. Also, there is a relative lack of new space, unlike in the Shenton and Raffles Place markets.
Office rents in Raffles Place have yet to flatten out like those in the Shenton, City Hall and Orchard areas. Monthly Raffles Place Grade A rents fell 3.5 per cent to $7.85 psf, from $8.13 psf in Q3. Monthly prime rents there also dropped 2.6 per cent to $7.60 psf, from $7.80 psf in Q3.
Nevertheless, commercial landlords in Raffles Place can take comfort from the fact that the rental declines are smaller than those between Q2 and Q3.
Mr Ang expects prime rents to ‘remain soft’ for the rest of this year and the first half of 2010. ‘We think the influx of 2.2 million sq ft of new prime office space in 2010 needs to be well absorbed before we can see a bottoming of prime office rents,’ he said.
In a separate report, Jones Lang LaSalle said: ‘In markets with a large supply overhang, such as Singapore, there is likely to be continued upward pressure on incentives as owners seek to secure tenants.’
Source: Business Times, 20 Nov 2009
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