The commercial real estate sector’s sentiment is improving as renting activity shows signs of growing with the economic recovery.
Prime office vacancy in Singapore has declined but only rents for new office buildings have increased, as property consultancy firms have detected increasing office rentals in some parts of town in the past six weeks. Two research houses anticipate rents to bounce back as much as 30 percent by 2012.
In Singapore, “office rents have a tendency to overshoot on the downside”, CIMB analysts Janice Ding and Donald Chua said. “However, past cycles also teach us that an office recovery can be surprisingly swift.”
According to a mid-second-quarter report by Cushman & Wakefield, the monthly rental of Grade A buildings in Raffles Place averaged $7.53 psf, higher than $7.52 psf in Q1.
The average prime office rent in the Shenton area climbed 1.6 percent to $5.85 psf in Q2 from $5.76 psf in Q1.
Rents for top grade space in Raffles Place, City Hall and Orchard still declined, but there is a “glimmer of hope on the bottoming of prime rentals,” said Cushman & Wakefield.
With firms absorbing almost 90,000 sq ft during the past six weeks, demand for space is returning. Thus, the prime office vacancy rate slipped 0.6 percentage points to 5.8 per cent.