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Overall average Grade A rents in Singapore rose to S$10.20 per sq ft per month or 2 percent higher than that of a quarter ago and 9.9 percent year-on-year, according to the latest findings released by Cushman & Wakefield.
Notably, this was the highest recorded increase in average rents since late 2011.
According to the report, the rise is largely attributed to the tightening of available Grade A space areas like Marina Bay, where the average effective monthly rate increased to S$13.00 per sq ft per month, and Raffles Place, where rents remained stable at S$10.25 per sq ft per month as at the third quarter of 2014.
Additionally, average rents in Shenton Way saw a minimal rise of 0.6 percent from S$8.40 per sq ft per month In Q2, while Orchard Road rents posted a slightly larger quarter-on-quarter increase of 1.0 percent to S$9.80 per sq ft per month. Meanwhile, City Hall/Marina Centre rents posted an increase of 5.5 percent from Q2 to S$9.50 per sq ft per month.
The report also noted that vacancy rates in the Marina Bay area fell to 6.1 percent from 6.6 this quarter, mainly due to the take up in the Marina Bay Financial Centre. Over at Raffles Place, vacancy rates saw a slight decline to 2.6 percent in Q3 from 2.7 percent in the previous quarter, while City Hall/Marina Bay vacancies inched up to 1.6 percent from 1.5 percent previously. Overall, Q3 vacancy rates for Grade A offices in the five main submarkets was marginally up to 3.6 percent amid moderate leasing activity.
Meanwhile, office vacancies in the suburbs declined to 1.8 percent from 2.5 percent as prime downtown rents steadily increases, prompting tenants to deploy different strategies. “Banking and financial institutions remain conservative and are continuing to seek to manage occupancy costs by consolidating space and relocating back office functions to the suburbs. In contrast firms from the technology sector are continuing to increase their presence in the CBD,” the firm said.
Moving forward, Cushman & Wakefield expects a strong leasing activity in Q4 with the expected completion of CapitaGreen and South Beach, with net absorption on track to reach up to 900,000 sq ft this year. The firm expects tenants to look for strategies to maximize space usage and increase productivity due to an increasingly competitive market. “With prime rents expected to continue to rise, those tenants for which a Grade A location is not essential are likely to look further afield to the suburbs which may lead to further decline in vacancy rates in these areas,” it 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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