Raffles Place office rents stagnate amid Eurozone fears

Office rents in the Raffles Place business district have stalled, according to figures from property services firm, DTZ.

Prime office rents were unchanged in the second half of the year, after rising by 5.4 per cent and 3.3 per cent in the second and first quarters respectively, DTZ said.

DTZ attributed the stagnation to occupier concerns over the worsening Eurozone debt crisis.

The average office rent in Raffles Place held at S$9.80 per square foot per month in the fourth quarter, the DTZ figures show.

For 2011 as a whole, the average prime rent rose at a slower pace of 8.9 per cent, down from the 13.9 per cent increase in 2010.

The rental slowdown has been accompanied by a decline in occupancy.

The average occupancy rate for office space in Raffles Place fell in the fourth quarter by 3.7 percentage points from the previous period, and dropped 7.6 points from a year ago to 89.1 per cent, according to the DTZ figures.

Raffles Place landlords were “dealt the double whammy of substantial new supply and an outflow of demand to Marina Bay,” DTZ said in a statement.

“Ocean Financial Centre, OUE Bayfront and One Raffles Place Tower 2 were completed in the year while major occupiers such as Standard Chartered Bank relocated to Marina Bay Financial Centre Tower 1 and Bank Julius Baer and Lloyd’s of London moved to Asia Square Tower 1,” DTZ said.

DTZ Executive Director Business Space, Cheng Siow Ying, said many expansion plans had been put on hold as “occupiers adopt a wait-and-see stance in view of the uncertain economic environment.”

Landlords have generally become more flexible in packaging lease terms, Ms Cheng said.

DTZ also noted a drop in occupancy at Marina Centre in the fourth quarter 2011; down 0.9 per cent on-quarter, and down 2.4 per cent from a year earlier, to 96.3 per cent.

“The fall in occupancy rate in Marina Centre was smaller compared to Raffles Place as the decline in demand was mitigated by a lack of new supply in the area,” DTZ said.

Rents at Marina Centre fell 1.6 per cent in Q4 from the previous quarter, but they rose 15.6 per cent over the year, with much of the gain recorded in the first half of the year.

Source : Channel NewsAsia – 28 Dec 2011

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