Office rents in central areas up for first time in 7 quarters

Monthly rental rates for office space in the Raffles Place/New Downtown micro-market increased for the first time in almost two years during the second quarter, as improved infrastructure in the area lent support to demand.

With average office rents in the overall Central Business District also stabilising, the outlook is positive for the second half this year, Colliers International said in a quarterly report.

Average monthly rents for premium grade offices in the Raffles Place and New Downtown areas rose by 2 per cent from the previous quarter to S$9.60 per square foot between April and June, said the report.

This marks a sharp rebound after a 1.4 per cent on-quarter decline in the first quarter, and is also the first increase across all areas since the market downturn in the fourth quarter in 2011.

“Office buildings located in the New Downtown area have continued to draw interest from tenants as the locality progressively develops to become the new financial centre of Singapore, with both the road and public transport infrastructure taking shape,” said Colliers International’s Executive Director of Office Services Marcus Loo.

The recovery also came on the back of the fifth consecutive quarter of increase in occupancy rate in the area, to 93.5 per cent in the second quarter.

As more tenants seek quality office space in these areas, rising demand has pushed up rents while resulting in the stabilisation of rental levels islandwide, Mr Loo added.

In the second quarter, there was no change to the average rents of both Grade A and Grade B office spaces in all areas outside Raffles Place and New Downtown, the report showed. All other areas, excluding Beach Road and City Fringe, also saw higher occupancy rates during the period.

Going forward, office rents islandwide are expected to stay relatively flat with some marginal upside, said Colliers International’s Director of Research and Advisory Chia Siew Chuin.

Prime units in Raffles Place and New Downtown are likely to fetch higher rents, she added.

“On the back of improving market sentiment, and given that more office tenants are on the lookout for modern and efficient floor layouts, rents for Premium Grade office space in the Raffles Place/New Downtown micro-market is expected to head north in (the second quarter) by up to 5 per cent,” she said.

Source : Today – 9 July 2013

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