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Office rents in Singapore’s central business district (CBD) continued to increase in Q3 2014 amidst tighter vacancy and limited supply, according to the latest report from Colliers International.
Average monthly rents of Premium Grade office space in Raffles Place/New Downtown area recorded its highest quarterly growth in three years when it climbed by 6.1 percent to S$11.67 per sq ft during the third quarter compared to Q2 2014. Grade A office space in the same micro-market posted a milder gain of 2.9 percent to S$10.25 per sq ft, while those in Shenton Way/Tanjong Pagar rose by 2.9 percent to S$8.83 per sq ft.
“The continued rental growth comes amid a supply squeeze, given that the average occupancy rates of most micro-markets have breached the technical full occupancy rate of 95 percent,” said the report.
For example, the average occupancy rate of Grade A space in Raffles Place/New Downtown area and Shenton Way/Tanjong Pagar reached 97.2 percent and 99.4 percent respectively as of September 2014.
At the same time, average occupancy rate for Premium Grade space in Raffles Place/New Downtown area improved to 94.1 percent from 93.4 percent three months ago.
“Overall, the average occupancy rate for completed Premium and Grade A office space in the CBD held firm at 96.5 percent in Q3 2014, relatively unchanged from that in Q2 2014, which was already the highest occupancy level recorded in more than five years,” noted the property consultancy.
“The tight market gave landlords greater pricing power over tenants, thereby empowering them to test the market by raising rental expectations with each benchmark deal closed,” it added.
Looking ahead, about 1.7 million sq ft of new office space are expected to enter the market in Q4 2014 with the completion of projects such as Westgate Tower (300,000 sq ft) in the suburbs, South Beach Tower (500,000 sq ft) in Marina/City Hall and CapitaGreen (700,000 sq ft) in Raffles Place/New Downtown area.
Although occupancy is expected to fall slightly during the fourth quarter due to the upcoming completions, supply is expected to remain limited next year.
Meanwhile, rents of Premium Grade office space in Raffles Place/ New Downtown area are expected to grow by nearly 15 percent by year-end, while Grade A and Grade B office space could post a rental expansion of 10 percent.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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