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Rents of prime Grade A office space in Singapore’s major commercial districts increased by 1.6 percent on average in Q4 2014 due to prevailing tight vacancies, according to Cushman and Wakefield’s latest report.
This brings the full-year growth to 10.9 percent – the highest figure among the core markets in the Asia Pacific (APAC) region.
“While the tight supply has played a part in pushing up rents for offices here, leasing momentum has also been sustained at a level that has gradually eroded vacancies and tilted the market in the landlord’s favour,” said Cushman & Wakefield’s Managing Director of Research for APAC, Sigrid Zialcita, explaining that the low vacancy rate stems from the willingness of renowned companies to establish a presence in Singapore.
For instance, Vodafone recently expanded its office footprint here, while General Motors took up the 30,000 sq ft space vacated by Bank of America Merrill Lynch. Publicis also opened a 30,000 sq ft office at Income@Raffles, while LinkedIn occupied the 50,000 sq ft space vacated by Barclays in Marina Bay Financial Centre Tower 2.
“This underscores the resilience of the office leasing market, which has benefitted from a more diverse economic base. This has allowed firms from sectors like energy, resources and consumer products, and increasingly, IT and media and communications, to take up some of the slack left by the financial sector,” noted Toby Dodd, the consultancy’s Managing Director for Singapore.
“Still, we note that regional banks, which have not been affected as much in the financial crises, remain well-placed and have been expanding,” said Zialcita.
Moving forward, rental growth of Grade A office spaces in the city-state is expected to moderate to 5.7 percent in 2015. Specifically, average rents at Raffles Place could reach S$11 per sq ft per month, while those in Marina Bay could surpass S$14 per sq ft per month. In total, office space absorption in the major commercial districts is predicted to hit 1 million sq ft.
“Rental gains in Tokyo will likely pip the republic’s next year. However, Singapore’s economy, on the whole, is on a firmer footing and thus, the island’s office sector will offer the best fundamentals in the region, as compared to the markets of Australia and South Korea. Vacancies in the Singapore market will fall to be the lowest as compared to the rest of the developed countries in the region,” she added.
Meanwhile, vacancy rates are expected to rise starting from 2016 after the completion of Guoco Tower and Marina One, which will contribute 2.8 million sq ft of new office space in the central business district. New office supply in the suburbs will also rise as decentralization of Singapore’s commercial hubs gains momentum.
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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