Grade A offices in areas like Shenton Way and Raffles Place are now looking more attractive to Singapore firms.
Experts said companies are taking advantage of cheaper rentals, as well as more space made available by large multi-national firms moving into the Marina Bay Financial District.
IT marketing firm Sapient said they struck a pretty good deal for their current space at Cecil Street. After negotiating with landlords, they managed to agree on a price at least 30 per cent lower than areas like Newton Circus.
The company is paying about S$7 per square foot for its current office space, which is about 9000 square feet.
Stefan Hirsch, managing director of Sapient, said: “I think they were quite forthcoming, also on the terms. They were maybe more willing to negotiate with us than 12 months ago. The real estate firm that we worked with also said that it has got a lot little easier to ask for concessions than it used to be.”
Sapient said that being located in the city gives them access to clients and talent in the industry. Other firms in the legal, energy and engineering sectors have also been edging their way into prime office spaces left behind by those moving into the Marina Bay Financial District.
According to Knight Frank, Grade A and A-plus offices in the Central Business District are going at between S$7.40 to S$11.90 per square foot.
Some firms, however, remain cautious from making huge commitments because of the current economic outlook.
Louise Toovey, senior manager at Knight Frank, said: “Things are quieting down, everybody’s waiting to see what’s going to happen in Europe, so people are just holding tight. I have a lot of my clients who are coming to me and just wanting to extend for just 12 months or two years, just to play safe and see what happens.
“People don’t want the capital expenditure of having to move to a new office and fit out from scratch. So we have a lot of companies coming to us and asking us for fitted out space, so they don’t have that huge capital expenditure when they move offices.”
Experts said the economic lull may continue to have a drag on office rentals for the rest of the year.
Andrew Tangye, Regional Director (Markets) at Jones Lang LaSalle, said: “In the last quarter, Jones Lang Research has recorded a 1.1 per cent drop in rents across the whole CBD, so generally demand is weaker than it was.
“I think a lot of companies, especially multi nationals, are adopting a wait-and-see approach, we expect rents to continue to soften until the end of this year to the early part of next year.”
For the coming quarter, property firm Knight Frank expects office rents in Raffles Place to fall between one and two per cent on-year, with rents ranging between S$7.30 to S$11.20 per square foot.
Leasing activity is also expected to slow as the festive season approaches.
Source : Channel NewsAsia – 31 Oct 2012