Prime office rents in Singapore have finally picked up in the second quarter following a six-quarter decline, according to CB Richard Ellis (CBRE).
With solid leasing activity, the large supply of commercial space coming on-stream seems “increasingly manageable”, added CBRE. The property consultancy firm has also expressed concern if there will be adequate space four to five years from now.
The average monthly prime office rent in Q2 reached $6.90 psf, up three percent from $6.70 psf in Q1, while the average monthly Grade A office rent hit $8.45 psf, a 5.6 percent increase quarter-on-quarter.
The vacancy rate in the core CBD was 6.7 percent, 8.1 percent increase compared to the previous quarter. Rents outside the CBD such as Alexandra, Novena and Orchard remained stable in the previous two to three quarters.
Moray Armstrong, executive director of office services at CBRE, said that pent-up demand from MNCs boosted leasing momentum. “With confidence restored in late 2009, decision makers initiated space planning, leading to a pick-up in requirements.”
Space demand from companies in the professional services, investment banking, insurance, hedge fund and private equity sectors also increases.
CBRE has become more positive about the take-up of new office space. About 6.9 million sq ft of new offices is expected to emerge from H2 2010 to 2015, and more than half of this has been pre-leased.
The property consultancy has also projected that the market can take-up an average of 1.5 million sq ft of new space each year for the next four-and-a-half years. The figure exceeds the average yearly take-up of 1.28 million sq ft in the previous five years.
With the improving outlook for the commercial sector, it was surprising that prime development land in the core CBD was not included in the government land sales programme, said CBRE.
“Projecting forward 4-5 years, some early concerns on a potential gap in the office supply pipeline start to emerge,” it said.