Rental growth for transitional offices situated in the city-fringe area are expected to slow down in the coming months. But such offices can maintain their yields, if they are located around Mohammed Sultan and Scotts Road.
Office rentals in the Central Business District (CBD) have dropped 60 percent from their highest peak in 2008, prompting several companies to move back into the city.
The rise in demand will help the rental recovery of major CBD offices, but transitional offices could expect slower rental growth instead, said analysts.
Market watchers claimed that prices for transitional office space have been stable at $5 psf to $6 psf, slightly down from its $8 psf highs in 2008.
Meanwhile, rentals for prime office in the CBD have slumped to roughly $8 psf, down from the recorded $18 psf to $21 psf in 2007 and 2008.
“We have put in the effort into not just building a transitional office. We are building something which is up to what the market requires, which is closer to A-grade office area,” said Mr. Kenny Tan, chairman of Link (THM) Holdings.
“We are asking for rentals which are just 20 percent below the CBD areas, while being two minutes away from the CBD,” he added.
Additionally, tenants at transitional offices located outside the city need not to shoulder extra costs such as charges on Electronic Road Pricing.