MNCs snap up prime office space

DESPITE the sluggish economy, downtown office rentals show no sign of budging from high, with multi-nationals seemingly largely unfazed by top dollar demands for prime space.

Yesterday, office landlord CapitaCommercial Trust (CCT) announced that mining giant BHP Billiton had renewed its lease at Capital Towers, while JPMorgan Chase expanded its premises by one-and-a-half floors in the same building.

Also, Korea’s Shinhan Bank has taken up new space at One George Street, which comes under CCT’s portfolio as well. That’s a total of 77,900 sq ft. These leases will run between two to three years.

The newly-committed, “higher end” rentals are between $16 and $20 psf per month, a CCT spokesperson said. Still, they “are in line with the rental rates achieved at comparable Grade A office buildings in the respective micro-markets”.

CB Richard Ellis reported that the average Grade A office rental stood at $18.80 psf per month in the second quarter of this year, up 15 cents from the preceding quarter.

Although it has not been unusual for office rents to hit $20 psf per month at the peak of the property bull run, “nowadays, it’s less common”, said Knight Frank research director Nicholas Mak. “You also have to look at the age and the quality of the building. Capital Tower is the newest building in that part of Robinson Road.”

Ms Lynette Leong, chief executive of CapitaCommercial Trust Management, described the latest transactions as “a vote of confidence”.

Looking ahead, analysts expect central business district space constraints to ease as more firms and Government agencies move out to cheaper decentralised areas and new supply comes on stream.

Still, Cushman & Wakefield managing director Donald Han expects rents to stay firm for the next 12 to 24 months as the market remains “fairly tight”.

Source : Today – 5 Sep 2008

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