THE collapse of Lehman Brothers Holdings may contribute to an easing of demand for prime office space in Singapore, where commercial rents are already peaking amid slowing economic growth, property consultants said.
The market turmoil that this week also forced the sale of Merrill Lynch to Bank of America and a bailout of American International Group will probably further slow expansion by international companies in Singapore, said analysts at DTZ Debenham Tie Leung and Cushman & Wakefield.
Said Ong Choon Fah, Singapore-based regional head of research at property consulting firm DTZ Debenham: “Rents have peaked and with the collapse of Lehman and the further shakeout in financial markets, this is going to accelerate.
“Financial companies are the ones occupying the very prime space and a lot of them are in survival mode.”
Gains in Singapore office rents will be limited as global economic growth slows, the property researchers said.
Singapore’s economy is forecast to grow between 4 per cent and 5 per cent this year, slowing from 7.7 per cent in 2007, as demand for Asian-made goods wanes and writedowns mount at banks and securities firms.
Lehman, which this week filed the biggest Chapter 11 bankruptcy in history, occupies office space in Suntec Real Estate Investment Trust’s Suntec development.
The firm has about 270 employees in Singapore.
So-called Grade A office rents will probably drop to about $14 per square foot a month in 2009 from $16 this year, Merrill Lynch analysts led by Kar Weng Loo estimated in an Aug 26 report.
Rents may fall further to $10 in 2010, when the first phase of the 2.6 million-square-foot Marina Bay Financial Centre is scheduled to be completed, and to $8 by 2011, the brokerage said.
For the second half of 2008, rents for prime office space will be little changed after climbing about 7 per cent in the previous six months, said Mr Donald Han, the Singapore-based managing director of Cushman & Wakefield.
Still, supply of prime office space is likely to remain tight until 2010 and any office space vacated by Lehman will probably filled quickly, Mr Han said.
“The market is still in a very healthy state and occupancy in Suntec, where Lehman has its offices, is in excess of 96 per cent.”
Source : Today – 18 Sep 2008