Lower rentals in CBD expected to dampen office rents in city fringe

Rental growth for transitional offices located in the city’s fringe is expected to slow in the months to come but such offices can maintain their yields, if they are located in areas around Scotts Road and Mohammed Sultan.

Office rents in the Central Business District have slipped some 60 per cent from their peak in 2008 and that has prompted some companies to move back into the city.

Analysts said the pick up in demand will help rental recovery for prime offices in the CBD, but transitional offices could see slower rental growth instead.

Market watchers said prices for transitional office space have held steady at $5 to $6 per square foot (psf), just slightly down from their $8 highs two years ago.

Meanwhile, CBD prime office rentals have slipped to around $8 psf, down from $18 to $21 psf recorded in 2007 and 2008.

Link (THM) Holdings chairman Kenny Tan said: “We have put in the effort into not just building a transitional office. We are building something which is up to what the market requires, which is closer to A-grade office area.

“We are asking for rentals which are just 20 per cent below the CBD areas, while being two minutes away from the CBD.”

Another plus: Tenants at transitional offices outside the city will not have to bear extra cost, such as Electronic Road Pricing charges.

Source : Today – 17 Jun 2010

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