Prime and average Grade A office rental values are expected to decline for about 20 percent in Q4 this year from the previous quarter, CB Richard Ellis said.
The fourth quarter fall means that for this whole year, estimated fall in rental is only about 14 percent for prime space and 13 percent for Grand A space.
“Modest rental growth featured in the early part of 2008, but the market had peaked by Q3 2008. It was only in Q4 that the sheer depth of the financial crisis pitched the office market into decline,” said Moray Armstrong, CBRE executive director.
The firm gave an estimation of the monthly average Grade A office rental of nearly $15 per square foot (psf) which is relatively cheaper than Q3’s $18.80. Meanwhile, the average monthly rental value of prime office is estimated to fall to $12.90 from Q3’s S$16.10.
Donald Han, managing director of Cushman & Wakefield Singapore, predicts that office rents for Grade A will further decline to 10-15 percent in the first half of 2009. He said, “Landlords are more keen to provide existing tenants with an incentive to retain them, in terms of rental discounts during lease renewal negotiations; because if they leave, the landlord will suffer downtime until it finds a replacement tenant that will also have to be given fitting-out time. This means loss of rental income.”
Mr Armstrong however insisted that it would be a severe pressure to companies to reduce costs. The reality in the office market of Singapore is that most tenants with rent reviews and renewals in the following year under leases will still faced rents that might possibly increased by 75 percent to 150 percent.