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Without cash flow issues, Grade A office landlords such as Duo Tower (pictured) and Marina One have reduced pressures to rent out non pre-committed office spaces.
Although some expect further declines in rent particularly for older Grade A office buildings, Savills believes that the volatility in office rents are anticipated to ease in light of several inter-linked reasons, reported the Singapore Business Review.
“Firstly, there are only a handful of Grade A office landlords, and all have deep-rooted liquidity, especially Marina One and Duo Tower, both of which are owned by the same sovereign wealth funds of Singapore and Malaysia,” said the property consultancy.
With a combined area of about 2.45 million sq ft or around 30 percent of the upcoming Grade A CBD office supply, these two are among the top-tiered landlords, from which other building owners and developers based their rents.
“With 60 percent of Marina One being pre-committed, the pressure to lease out the remaining 40 percent is reduced,” noted Savills.
In addition, it highlighted that cash flow to Marina One and Duo Tower is not a problem, adding that Singapore and Malaysia’s sovereign wealth funds have strong holding power.
“With this, the market has thus stabilised, easing the anxieties of owners of the other Grade A offices under construction. Signed-on rents for the next two quarters are thus likely to veer more towards the latter end in the bid-ask spread.”
Meanwhile, some tenants made more enquiries about renting space in buildings that are expected to be completed in 2018 and beyond after reading numerous reports that rents of Grade A office space are forecasted to remain weak in 2017.
“However, on finding out that landlords are now holding asking rents firm, with some even upping them, they are in a conundrum. This then plays back into the hands of their existing landlords, reducing the pressure on them to lower rents,” added Savills.
This article was edited by Denise Djong.
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