Office rents in prime financial district up by 25% over next two years: analysts

Rentals for international Grade A office space in Singapore’s financial district may climb at least 25 per cent in the next two years.

Analysts said Grade A office rents have already hit bottom, and will likely pick up from the second half of this year.

Singapore’s Marina Bay Financial Centre is one of prime areas in the city offering a new generation of office buildings.

They are less than 10 years old and are classified as “International Grade A” office space.

Analysts said these newer premises are normally in high demand from companies like financial institutions and law firms, which want to expand and consolidate their offices in one location.

And that is giving support to rentals.

“Because the economic condition is better than expected, as compared to the same time last year, tenants are more confident in expanding, and landlords are becoming more confident holding their rents,” said Donald Han, MD of Cushman & Wakefield.

Cushman and Wakefield expects prime Grade A office rents to rise between 5 and 10 per cent in the second half.

But analysts said what may drop or remain soft are the rents of Grade A or Grade B buildings, or those that are more than 10 years ago.

OCBC Investment Research believes there could still be an oversupply in non-Grade A office property space in Singapore.

Official figures show that some 8.3 million square feet of office space is due for completion between 2010 and 2012. And this may increase available office space by 11 per cent in two years.

Nomura said over the past six months, there has been a surge of pre-commitment deals for international Grade A office space, as companies look to house their operations under one roof.

“We think that office rents will start to pick up quite significantly over the course of 2009 to 2012. We are looking for rental levels to pick up around 28 per cent for international Grade A office space, and about 16 per cent for the normalised Grade A space,” said Tony Darwell, executive director of Nomura Singapore.

Looking ahead, analysts said some companies are already committing as early as one year before their current leases expire.

Source : Channel NewsAsia – 3 Jun 2010