Prime office space rental rates continue to soften and could slip another two to three percent this quarter, according to Cushman & Wakefield.
“The relocations of office tenants from existing to new buildings will exert pressure on rents…prime rents would remain soft over the first half of 2010.”
In a mid-Q1 report, the property consultancy firm said that monthly rental rates at Raffles Place Grade A buildings declined by 1.6 percent to $7.62 psf from $7.74 psf in Q4 2009.
The monthly rents of prime office space in the Shenton Way area also dropped by 1.5 percent to $5.82 psf, from Q4’s $5.91 psf.
“Extrapolating from the mid-quarter read, we therefore expect prime rents to decline by a modest 2-3 per cent for the first quarter of 2010,” it said.
While rental rates were down, vacancy rates across prime office buildings improved slightly, from 7.4 percent in Q4 up to 6.9 percent.
Ang Choon Beng, research director of Cushman & Wakefield, expects new commercial developments to have a better year ahead compared to the existing ones. “A bifurcation of the prime office market is taking place,” he said.
New offices are expected to launch this year including those at 50 Collyer Quay and the first phase of Marina Bay Financial Centre.
These new buildings have attracted tenants and achieved high pre-commitment levels, added Mr Ang. This leads the firm to believe that rental rates of these new projects could bottom out soon, probably by the second half of this year.
For example, the newly completed Straits Trading Building has attained a 90 percent occupancy rate at an average rent of $9.00 psf.
However, rental rates of existing office buildings may continue to decline until the end of the year, Mr Ang noted.
“The relocations of office tenants from existing to new buildings will exert pressure on rents in existing buildings,” he said. “We believe prime rents would remain soft over the first half of 2010”.
According to reports from several consultancy firms, rental rates of Grade A office space in Singapore were down 40 percent year-on-year, the most significant drop in the Asia-Pacific region last year. This has raised the cost competitiveness of the country compared with other prime cities like Tokyo and Hong Kong.