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Gross average monthly rent of premium grade office space in Raffles Place and New Downtown area surged by 15.8 percent to S$11.93 per sq ft in Q4 2014 on a yearly basis, according to Colliers International.
This former is nearly double the 8 percent growth rate in 2013, while the fourth quarter’s rental price is near the previous peak of S$12.25 per sq ft in Q3 2011.
Similarly, rents of Grade A and B office space in the central business district also increased by 6.8 percent and 4.9 percent to reach S$9.23 per sq ft and S$8.09 per sq ft. With this, both have respectively exceeded previous peaks of S$9.14 per sq ft in Q3 2011 and S$8 per sq ft in Q4 2011.
In terms of sales, average capital values of grade A office space in the Raffles Place/New Downtown micro-market edged up by 2 percent to S$2,490 per sq ft, while the premium grade segment posted a similar gain to reach S$2,779 per sq ft in Q4 2014 on a quarterly basis.
Consequently, rental growth of premium grade office space in the micro-market hit 4.2 percent for the entire year versus 1 percent in 2013, while that for grade A office space climbed 4 percent, outpacing the 0.2 percent growth in 2013.
Meanwhile, average island-wide occupancy for both types of office space dipped by 2 percentage points to 94.8 percent in Q4 2014 on a quarterly basis. The biggest decline was seen by Grade A office buildings in the suburban micro-market, which recorded a drop of 7.2 percentage points to 91.6 percent.
Looking ahead, average rent of premium grade office space in Raffles Place and New Downtown area are expected to rise by 10 to 15 percent this year, while that for grade A and B office space in the CBD could increase by 10 percent.
In the sales front, the growth of capital values for premium grade and grade A office space in the Raffles Place/New Downtown micro-market is forecasted to be capped at 5 percent in light of the tougher loan-to-value rules.
As for occupancy rate, it is projected to experience a gradual rebound in 2015.
“Favourable demand drivers – such as a positive economic environment and the strong appeal of Singapore as the preferred business location – as well as the expected decrease in supply of new office space to about 1.1 million sq ft this year, will likely provide a window for some of the space completed in 2014 to be gradually absorbed over the next 11 months,” said Chia Siew Chuin, Director of Research & Advisory at Colliers International.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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