Prime office rents continue to dip: Cushman

PRIME office rents continued to soften going into 2010 and could slip another 2-3 per cent this quarter, says Cushman & Wakefield.

In a mid-first quarter report, the property consultancy noted that monthly rents at Raffles Place Grade A buildings had fallen to $7.62 per sq ft (psf), down 1.6 per cent from $7.74 psf in Q4 2009.

In the Shenton area, monthly rents of prime office space also dropped to $5.82 psf – 1.5 per cent lower than the $5.91 psf in Q4.

‘Extrapolating from the mid-quarter read, we therefore expect prime rents to decline by a modest 2-3 per cent for the first quarter of 2010,’ Cushman & Wakefield says.

While rents dipped, the vacancy rate across prime office space improved slightly to 6.9 per cent from 7.4 per cent in Q4.

Cushman & Wakefield research director Ang Choon Beng expects new commercial developments to have a better year ahead, compared with existing ones. ‘A bifurcation of the prime office market is taking place,’ he says.

New offices coming up this year include those at the first phase of Marina Bay Financial Centre and 50 Collyer Quay.

The new buildings have so far been able to attract tenants and achieve relatively high pre-commitment levels, Mr Ang says. This leads the consultancy to believe that rents of these developments could bottom out soon, probably by the second half of the year.

For instance, the recently-completed Straits Trading Building managed to attain a 90 per cent occupancy rate and an average rent of $9 psf.

On the other hand, rents of existing office developments may continue slipping until the end of the year, Mr Ang reckons.

‘The relocations of office tenants from existing to new buildings will exert pressure on rents in existing buildings,’ he says. ‘We believe prime rents would remain soft over the first half of 2010.’

According to reports from various consultancies, Grade A office rents in Singapore dropped most significantly in Asia-Pacific in 2009 by more than 40 per cent year-on-year. This has raised the country’s cost competitiveness compared with other cities such as Hong Kong and Tokyo.

Source: Business Times, 23 Feb 2010