CBRE says fall in office rents eases in Q2

Source : Channel NewsAsia – 6 Jul 2009

Property consultancy firm CB Richard Ellis (CBRE) has said the fall in office rents is showing signs of easing, thanks to improved sentiment and stabilisation of Singapore’s economy.

According to CBRE, monthly prime office rents averaged S$8.60 per square foot in the second quarter, representing an 18.2 per cent fall quarter-on-quarter. This was slightly lower than the 18.6 per cent quarter-on-quarter decline seen in the first quarter of the year.

Similarly, monthly Grade A rents registered a 17.5 per cent quarter-on-quarter decline to average S$10.15 per square foot. That was also lower than the 18 per cent drop recorded between January and March.

Moray Armstrong, CBRE’s Executive Director of Office Services, said: “Whilst the economy is still technically in a recession, the office leasing market was far more active in the second quarter, particularly in the month of June.

“We are seeing greater incentives – including, for instance, capital expenditure contributions to attract or retain quality tenants. Tenants that committed space this quarter included those from the insurance and healthcare sectors, as well as government-related companies.”

CBRE said occupancy levels is expected to continue its downward trend and office space take-up rate will most likely remain negative for the rest of this year.

This is largely due to the residual effect from previous downsizing exercises and an addition of at least 1.9 million square feet of office space by the end of this year.

Looking ahead, it expects islandwide vacancy rates to remain above double-digits for the next few years.

An addition of 8.3 million square feet of new office space is expected between the second quarter of 2009 to 2013, resulting in an excess supply in the market.

CBRE said Grade A office rents will face the greatest pressure, with the supply doubling its current available office space to 13.48 million square feet.