Office rents in Singapore showing signs of peaking

Source : Channel NewsAsia - 16 Jul 2008

Office rents in Singapore are starting to show signs of peaking, said property analysts.

They noted that prime rental costs have generally increased at a far slower pace in the first half of this year, compared to 2007.

Looking ahead, they expect office rents to soften even more towards the end of 2009 and early 2010 as demand for prime space eases.

Donald Han, managing director of Cushman & Wakefield, said: “The market is quite close to the peak, by virtue that we have seen the bulk of the expansion process by users, multinationals.”

Chua Chor Hoon, senior director of research, DTZ, said: “Rentals went up quite a lot last year – almost doubled. So there is a lot of resistance to that high level of rental, plus there is more cautiousness in the market now because of what’s happening in US and its impact on Singapore.”

Last year, Grade A office rents rose 96.5 per cent, compared to just 9.6 per cent in the first half this year.

Consultants said they expect to see more softness as some one million square feet of space may be released once major occupants complete their plans to move out.

“For banks like Standard Chartered, DBS and Citibank, you’ll probably see completion of these three portfolios in Changi Business Park in end 2009 and early 2010,” said Mr Han.

In addition, about 6.7 million square feet of space will come on-stream by 2011 and more than 60 per cent of it will be Grade A space.

While rentals for prime office space may be peaking, those for fringe locations have been increasing at a faster pace.

Ms Chua said: “The interesting thing we noticed is that for office outside the CBD, like the Harbourfront, Novena, Alexandra or Tampines, we see strong demand over there. Rental growth is slightly higher than in CBD.”

In the second quarter, rental growth for these decentralised areas was about 3 to 5 per cent.