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Singapore’s office market fared better than its retail and industrial counterparts, latest report from CBRE revealed.
In fact, average monthly rents of Grade A office space in the city-state rose to S$10.95 per sq ft in Q3 2014, representing a quarterly gain of 3.3 percent and up 14.7 percent from the same period last year.
For Grade B offices in the CBD Core, average monthly rents climbed by 2.4 percent to S$8.50 per sq ft, while islandwide rents for such premises increased by 2.6 percent to $7.90 psf from Q2 2014.
“Better quality developments saw the strongest take-up and this, in turn, supported higher rental escalations in these buildings,” said the property consultancy.
Additionally, this sector continued to be the top player in the investment sales market as with the previous quarter, accounting for S$1.772 billion or 36 percent of the total sales volume in Q3 2014.
Bolstered by the flourishing office market, a significant proportion of the investment transaction in Q4 2014 will likely come from this sector, particularly from the sale of completed strata units, CBRE noted.
Looking ahead, office rents are expected to rise further in the next few quarters thanks to low vacancy and steady demand. However, the pace of rental growth could slow down as early as H2 2015.
Notable upcoming office projects in Q4 2014 include Westgate Tower (304,960 sq ft) and CapitaGreen (700,000 sq ft), while the completion of South Beach Tower (527,450 sq ft) was deferred until Q1 2015.
Meanwhile, the retail sector saw monthly rents negatively affected by a labour crunch and weak sales stemming from a 2.8 percent drop in visitor arrivals in 1H 2014
“The challenge to secure manpower remained an impediment for retailers as it restrained expansion plans and/or curtailed existing store operations. There was more consolidation of stores in Q3 2014 as retailers took advantage of the current tough climate to reassess business strategies. Some retailers closed less profitable stores to focus on better perform,” explained CBRE.
Consequently, prime retail rents in Orchard Road remained unchanged at S$34.20 per sq ft per month compared to preceding quarter, while that of Suburban malls stayed the same at S$30.30 per sq ft per month.
Nevertheless, some new to market brands have opened their stores or proposed to establish a presence here in Q3 2014. These included Suitsupply, Boggi Milano and Billionaire Italian Couture, the report noted.
“The outlook for the retail market is likely to remain challenging in the next 6-12 months barring any positive catalysts such as the relaxation of employment rules that will spur leasing demand. Retail sales, however, could enjoy respite as tourist arrivals are expected to pick up,” CBRE predicted.
Separately, the industrial sector’s monthly rents were generally flat in the third quarter, except for business parks in the Rest of Island and upper floor warehouse space.
In particular, rents of business park space in the City Fringe were unchanged at S$5.50 per sq ft per month, while those in the Rest of Island dipped by 2.6 percent to S$3.70 per sq ft per month on a quarterly basis.
Monthly rents of ground floor and upper level factory space remained the same at S$1.85 per sq ft and S$1.50 per sq ft respectively, likewise for ground floor warehouse space at S$1.83 per sq ft. However, rents of upper level warehouse space declined by three percent to S$1.46 per sq ft.
“Going forward, the lack of industrial demand drivers and significant future stock is likely to exert further downward pressure on rents,” CBRE added.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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