Tag Archives: office rents

Office rents to soften as firms change premises


COMPANIES seeking newer premises to lease in the Central Business District will affect rents this year and leave landlords with significant vacant space to fill.

While some in the market expected tighter office supply amid a dearth of fresh space from new buildings, the game of musical chairs downtown means excess capacity is being freed up.

“With the bulk of the supply in the pipeline coming on stream only in 2016 and 2017, we expect office rents to soften unless we see the entry of new firms,” said DTZ research head Lee Nai Jia.

CapitaCommercial Trust’s CapitaGreen in Market Street, with 702,000 sq ft in space, and City Development’s South Beach in Beach Road, with 500,000 sq ft, were completed at the end of last year, but firms are already beating a path to their door.

Facebook, for instance, will vacate about 30,000 sq ft at its 158 Cecil Street office to take up 70,000 sq ft at South Beach.

Some firms are consolidating: Barclays Bank, which is leasing about 60,000 sq ft at One Raffles Quay, is expected to give up at least one floor.

Others are decentralising, with software developer Oracle vacating 70,000 sq ft at Suntec City Tower 4, to up 150,000 sq ft at Galaxis in one-north.

At the BlackRock-owned Asia Square, where Lloyd’s Asia is reportedly vacating 65,000 sq ft in space, typical lease terms vary from three to five years.

“That means we will see a number of tenant reversions and some movement of tenants, including (those) relocating, in 2015,” said Mr Hugh Andrew, managing director of BlackRock Real Estate in Asia-Pacific. He said the firm is negotiating with tenants renewing leases in the second half this year.

Raffles Quay Asset Management deputy chief executive Betty Lim said she was “confident” of office market performance.

Both firms said they continue to receive inquiries about office space.

But in a “flight to quality”, buildings in “less prime” areas are more vulnerable as leases expire. “Buildings housing firms in the technology, media and telecommunications sector are also vulnerable… as they have the option to decentralise if rents are too high,” said DTZ’s Dr Lee.

Average rents in Shenton Way are about $7.90 per sq ft (psf), while those in the newer Raffles Place area are $10.80 psf. Rents were unchanged from the previous quarter in both segments.

Marina Bay, termed the new CBD, commands the highest rents at $13.25 psf, up 3.9 per cent from the previous quarter.


Commercial space crunch in central area

Space crunch drives up office rents in CBD and Suburbs, as reported in today’s ST.

A space crunch in the Central Business District (CBD) and the completion of new suburban developments drove up office rents islandwide in the second quarter, consultants said.

The data underlines two key trends: One is that firms that do not need a downtown address are relocating to the cheaper sites on the outskirts while CBD rents are rising on the back of robust demand for limited space.

Average rents for Grade A office space in the CBD jumped 10.7 per cent overall to $10 psf per month in the second quarter from the preceding year, according to property consultancy Cushman & Wakefield.

The average gross rent in Marina Bay was $12.95 psf per month, a marginal 0.4 per cent higher than in the first quarter.

Another consultancy, DTZ, also estimated yesterday that average gross rents in Marina Bay rose 6.5 per cent to $12.25 per sq ft per month in the second quarter from the preceding three months.

Consultancies may come up with different rental estimates due to the varying baskets of properties that they track.

Rents in the Raffles Place and Shenton Way areas were cheaper than in Marina Bay.

In Raffles Place, Cushman said the average gross monthly rent grew 3.5 per cent in the second quarter from the first to $10.25 psf per month.

Rents in the older part of the CBD around Shenton Way, Robinson Road and Cecil Street stayed stagnant at $8 psf per month on average, said DTZ.

Cushman said the leasing momentum in the CBD would likely continue in this half of the year, with keen interest expected from companies in the business services and technology sectors.

Businesses that do not need to have a presence in the CBD are relocating to city fringe areas or the suburbs where rents are more competitive, it added.

Still, suburban rents shot up faster than those in the CBD in the second quarter compared with the same period last year, according to a report by consultancy Chestertons.

They leapt 22.6 per cent in April through June over 2013 to $5.70 psf per month on average while CBD space climbed 4.7 per cent to $9.64 psf per month.

This jump in suburban rents was mainly because newly completed Grade A office space there bumped up prices.

These completions include The Metropolis in Buona Vista and Jem in Jurong.

However, he said that landlords were unlikely to raise rents much soon.

“We expect landlords to adopt a tenant-retention strategy instead of raising rents significantly in 2014 or 2015, losing ‘loyal’ tenants and facing looming vacancies in 2016 when supply and relocation options are aplenty.”

DTZ said yesterday that around 2.7 million sq ft of office space will be completed between now and the end of next year.

Beyond next year, however, the pipeline supply of office space will reach a new peak of about 3.9 million sq ft in 2016, with about 60 per cent of that located in the CBD, it said.

Major buildings expected to be completed in 2016 include Guoco Tower in Tanjong Pagar and Duo Tower in Bugis.