The average rents for Prime Grade A office buildings in the CBD core area dropped 4.9 percent in Q4 from Q3, according to the data released by Jones Lang LaSalle (JLL).
This decline is much smaller compared to the 13.7 percent drop in Q3, the 11.6 percent in Q2 and the 28.1 percent decline in Q1 of 2009.
The $7.80 psf rental value in the fourth quarter reflects a 47.8 percent slide this year. This is against the $18.40 psf set in the third quarter last year.
JLL said the gap between the newly constructed Prime Grade A office buildings and the existing Grade A buildings will widen in the next few years as new developments are finished. The gap between the two is now 85 cents or 11 percent. In terms of percentage, the gap was widest in the third quarter of 2006, when the average rent of new office space was 28 percent higher than existing office buildings.
Over the next three years, the average yearly supply of new office spaces will be two million square feet in the CBD core area. This will likely weaken rental growth, said Chua Yang Liang, JLL’s head of SE Asia research.
For new Prime Grade A buildings that received good market response, rents may slide as early as the second half next year. However, rents in existing office buildings may continue to decline until the end of 2010, as vacancies are expected to increase due to ‘flight to quality’ by most tenants.