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The average monthly gross rents of premium grade office space in the Raffles Place/New Downtown micro-market were unchanged at S$11.93 per sq ft in the first quarter of 2015 after rising by about 2.2 percent in the previous quarter and 15.8 percent for the whole of last year, according to a report from Colliers International.
Similarly, rental growth of Grade A and Grade B office space across various micro-markets within the CBD were mostly flat, while those in Raffles Place/New Downtown micro-market rose 1.6 percent and 1.0 percent for each respective office type.
“In the suburban micro-market, rental levels of both Grade A and Grade B office space remained unchanged in 1Q 2015, having achieved a stable balance during the first three months of the year,” said the consultancy.
During the quarter, most of the leasing activities happened at the newly completed CapitaGreen building in the Raffles Place/New Downtown micro-market.
For instance, insurance firm Lloyd’s Asia leased about 75,000 square feet of space at CapitaGreen. Financial services firm Schroder occupied 44,000 square feet, while the world’s largest mining company BHP Billiton signed an agreement for two floors with a combined area of about 40,000 square feet.
Other new tenants include Twitter, ACE Insurance and Apple, will each occupy 22,000 sq ft, 38,000 sq ft and 35,000 sq ft of space with the option to lease another three adjacent floors.
“With CapitaGreen fast filling up, achieving an occupancy rate of above 70 percent, the average occupancy rate for premium grade office space in the Raffles Place/New Downtown micro-market climbed by 3.6 percentage points quarter-on-quarter to 91.8 percent as of Q1 2015,” Colliers said.
Amidst the healthy leasing demand, investors have become more interested in acquiring office buildings in Singapore. For instance, a consortium led by Perennial Real Estate Holdings purchased the 50-storey AXA Tower from BlackRock for S$1.17 billion or S$1,736 per square foot during the first quarter.
However, the sales of strata-titled office premises remained subdued in Q1 2015 due to the lack of new launches and the traditional festive lull period at the start of the year.
Based on caveats lodged at the URA’s Real Estate Information System (REALIS), there were only 31 strata-titled transactions during the first 11 weeks of the year, down 71 percent from the level seen in Q1 2014.
“Nevertheless, it is estimated that the total volume of strata-titled office unit sales could reach around 40 caveats for the full quarter once these have been added to the URA’s REALIS system,” Colliers shared.
Meanwhile the average capital prices of premium grade office space in the Raffles Place/New Downtown micro-market rose by 1.5 percent to S$2,821 per sq ft in Q1 2015 on a quarterly basis, while those in the Raffles Place/New Downtown micro-market climbed by 1.7 percent to S$2,532 per sq ft.
Looking ahead, office rental growth for this year is expected to slow down as compared to 2014 due to the significant number of office projects slated to be completed in 2016, the consultancy said.
“Therefore, the average monthly gross rent for premium grade space in the Raffles Place/New Downtown micro-market is now expected to increase by about 5 to 10 percent in 2015, while the rents for the overall CBD Grade A and Grade B office space could rise by up to 5 percent for the entire year,” it added.
Likewise, capital values of premium grade and Grade A office space in the Raffles Place/New Downtown micro-market could climb by as much as 5 percent in 2015.
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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