Property consultants believe the worst for falling office rents is over. Some even expect that space net take-up will be positive by this year’s last quarter if the country’s economy will continue to have a good performance.
The analyses of Cushman & Wakefield for the mid third quarter showed that the decrease in major office rents lessened. For instance, office rents of Raffles Place Grade A fell by 18 percent from $10.61 in the first quarter to $8.70 in the second. However since then, the company has dipped by 2.9 percent to $8.45.
Major office rents in the Shenton area are also showing the same trend. They have decreased by 5.8 percent from the second quarter to $6.32 – a slight decline as compared to 17.9 percent from $8.17 in the first quarter to $6.71 in the second.
The office vacancy rate in the mid third quarter is 6.1 percent, up by 0.4 percent from the second quarter.
“As economic conditions continue to stabilise, we will see the flow-through to improved space absorption happening over the next few months,” research director Ang Choon Beng of Cushman & Wakefield said. “On a more optimistic note, if Singapore’s GDP performance comes in at the better end of current estimates, we could potentially see positive space absorption by Q4 2009.”
The GDP of Singapore in the second quarter has increased by 20.7 percent quarter-on-quarters. The government, however, remains guarded, keeping the forecast of its GDP for the year at four to six percent contraction.
From the last quarter of 2008, three consecutive quarters showed negative office space net take-up. This was due to weak demand for space while supply was high.
Other consultants interviewed by The Business Times agreed that a slower pace of falling office rents was evident, but regarding the rest of the year’s strong space absorption, they were more conservative.
“It’s probably a little bit early to forecast positive take-up over the second half,” said Moray Armstrong, executive director for office services of CB Richard Ellis. This is because downsizing plans have been introduced by some companies, which will only show its effect in the coming months.
Armstrong also explains that downward pressure is still possible for the rents in the coming months and positive space take-up might not be felt until the following year.
In Singapore, Chris Archibold, market’s head of Jones Lang LaSalle, is cautious as to where the net take-up could end up in the fourth quarter. “There are little bits of expansion here and there but they are very few and far between at the moment . . . and we’re still seeing some organisations downsizing,” the company said.