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Office rents in the CBD continued to inch up by 1.3% quarter-on-quarter (q-o-q) due to the shortage of new office space in Q1, according to DTZ Research.
The consultancy said the potential net supply for the whole of this year is estimated at 530,000 sq ft, less than a third of that in 2014. Of this, only 131,000 sq ft from the addition and alteration works of OUE Downtown and the Crown@Robinson will enter the CBD area this year.
In Q1, some 519,000 sq ft–which makes up 43 percent of the total 2015 pipeline–was added to the market with the completion of city-fringe developments South Beach Tower and The Prospex. This was however offset by the exit of Equity Plaza and GE Tower, which removed 670,000 sq ft from the existing stock.
According to DTZ, supply shortage in the CBD this year can be mitigated by about 181,000 sq ft of shadow space of which 38,000 sq ft will be released in the second half of the year. The firm also noted that another 328,000 sq ft of second hand space will also come from leases expiring in 2015 with 56 percent occurring in the second half of this year. The bulk of these are in the Shenton Way/Robinson Road/Cecil Street area, DTZ said.
The supply crunch pushed average monthly gross rents in the CBD up by an average of 1.3 percent q-o-q. This was mostly seen in the Marina Bay area which posted a 3.8 percent increase resulting to 13.75 per sq ft rents. Rents in the Raffles Place area, however, remained unchanged at S$10.80 per sq ft.
Meanwhile, average monthly gross rents in decentralized areas also posted a q-o-q increase of 0.4 percent to S$8.07 per sq ft, narrowing the price gap between these areas and the CBD.
“With limited supply options in the CBD this year, businesses may consider office space in decentralised areas as an alternative. However, firms are only willing to relocate if these decentralised buildings have good accessibility and the necessary amenities to support and attract office workers,” said Cheng Siow Ying, Executive Director of Business Space at DTZ.
However, DTZ noted that the flight to decentralized areas is likely to moderate in subsequent quarters. “With top quality office space in the CBD coming on board in 2016 and 2017, firms will have less incentive to locate in decentralized areas,” it said.
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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