Bookmark & Share
The occupancy rate for office buildings across Singapore remains above 90 percent, but it has dipped by 2.3 percentage points in Q4 2014 as compared to the previous quarter, according to the latest report from DTZ.
Amongst the office buildings tracked by the property consultancy, only Marina Bay saw a quarterly growth in occupancy rate of 3.2 percentage points.
Islandwide net absorption also slumped by 37 percent in the fourth quarter, dragging net demand to 1.36 million sq ft for the entire year, a decline from the 1.45 million sq ft recorded in 2013.
Despite the lower take-up of office space and the marginal decline in occupancy, average monthly gross rents in Singapore’s central business district (CBD) increased between 2.4 and 4.0 percent on a quarterly basis, with office space in Marina Bay posting the largest rental gain to reach S$13.25 per sq ft.
Consequently, the average monthly gross rents of CBD office space increased between 4.0 to 19.0 percent for the entire year versus 2013’s lower range of 2.4 to 6.1 percent.
But due to the spiralling rents, more traditional office users are looking to relocate their backend operations to some business parks and high-tech industrial space. However, despite this trend, landlords are not willing to lower their price expectations. In fact, those who are anticipating rental increases in 2015 are willing to wait rather than seal a lower rental agreement this quarter.
“Their optimism is backed by limited supply in 2015 and growth in demand for space from technology, media and telecommunications (TMT) sector, serviced office operators and insurance sector,” noted DTZ. It pointed out that firms in the TMT sector, like Google and LinkedIn, are willing to pay higher rents for prime space in order to boost their prestige and attract quality talent.
Looking ahead, office rents are likely to continue their rise in 2015, albeit at a slower rate than this year. However, expectations for higher rents will be mitigated by the 1.1 million sq ft of space that will re-enter the market next year due to expiring leases along with 214,000 sq ft of upcoming shadow space, added the consultancy.
In concurrence with DTZ, Knight Frank Singapore said: “Riding on the momentum of continuing leasing activities, the office property market is expected to see continuing rental growth in the first half of 2015.”
Knight Frank explained that the forecasted slower economic growth and possible higher market volatility in 2015, coupled with a moderate inflow of new office spaces over the next two years, could force tenants to adopt a more conservative approach in terms of office space expansion and relocations in a bid to lower rental costs.
“In view of these moderating factors in spite of limited supply, prime office rents are likely to register slower annual growth of 5 to 7 percent by final quarter of 2015,” it added.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
Related Articles:
Rosy forecast for office market: analyst