S’pore offices 3rd most expensive in Asia

Slowdown in fall in rents in Q3 attributed to confidence in economic recovery

OFFICE space in Singapore was the third most expensive in the region in the third quarter, as the fall in rents slowed significantly, a Colliers International survey has found.

‘Among all Asia-Pacific cities, Singapore registered the most distinct deceleration in office rental declines,’ said the firm’s director of research and advisory, Tay Huey Ying.

She attributed this to growing confidence in economic recovery, which ‘lifted the gloom that had been pervading the office property market since Q4 2008′.

The Colliers survey, which covers 25 Asia-Pacific cities quarterly, found Singapore’s office rents to be the region’s third most expensive in Q3, after Tokyo and Hong Kong.

The average monthly Grade A rent in the Central Business District (CBD) dipped 6.4 per cent quarter-on-quarter in Q3, after a steep 26.1 per cent slide in Q2. The average gross office rental in the CBD in Q3 was $6.31 per square foot.

Enquiries about new space rose in Q3 as some occupiers began searching for larger and better premises.

One of those that has already upgraded is insurer AIG, which relocated from the CBD fringe to 78 Shenton South Tower. And at Mapletree Anson, more than 100,000 sq ft of space has been leased to companies such as AON, QBE and Sumitomo Corporation, which are relocating from Singapore Land Tower, OCBC Centre and Equity Plaza respectively. Elsewhere, Servcorp has committed to one floor at Marina Bay Financial Centre in the CBD for seven years.

The average occupancy rate of prime office space in the CBD fell 2.1 percentage points from a quarter ago to 92.2 per cent in Q3 as several new buildings, including Mapletree Anson and 71 Robinson, were completed.

But there could be further downward pressure on rents as demand for Grade A office space here is unlikely to grow in the short term, while supply is set to rise with the completion of major projects such as Twenty Anson and the Straits Trading Building.

Ms Tay said that she expects office rents to fall as much as 5 per cent in Q4, taking the full-year contraction to 48 per cent.

Source: Business Times, 18 Nov 2009