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08-04-14, 15:17
http://www.straitstimes.com/archive/friday/premium/money/story/office-occupancy-rates-still-rising-q1-20140404
Office occupancy rates still rising in Q1
Published on Apr 4, 2014
By Rennie Whang
THE strong take-up rate of office space in the second half of last year has continued into the first quarter of this year, a new report has found.
Property consultancy DTZ Research said occupancy rates kept climbing in the Central Business District (CBD), driving rents up.
The increase in occupied space in the first quarter over the fourth quarter of last year was about 572,000 sq ft, indicating consistent quarter-on-quarter improvement in take-up since the second quarter of last year, it said.
The main drivers of demand were tenants taking out extra space in existing buildings or larger space at new premises.
For example, Google took additional space in Asia Square Tower 1 while Shell leased more space when relocating to the Metropolis.
"Shadow space" - excess space tenants have leased but wish to sublet to ease the rental burden - was estimated to be about 270,000 sq ft in the first quarter.
That is the highest level since the second quarter of 2012 but DTZ Research said it is expected to be quickly absorbed.
The largest proportion of shadow space in the first quarter was in outlying areas after the Ministry of National Development put up several floors in Jem for sub-lease. Several firms have already indicated keen interest in sub-leasing this space.
Islandwide, the occupancy rate in the first quarter rose 0.4 percentage point to 95.1 per cent.
Average gross rents rose 4.2 per cent in the Raffles Place area to $9.95 per sq ft (psf) while they rose 3.9 per cent to $8 psf in the Shenton Way, Robinson Road and Cecil Street areas.
Rents in these areas increased by an average of 8.8 per cent from last year.
In Marina Bay, with only premium grade buildings, average gross rents have risen even higher, by 4.5 per cent from last quarter and 9.5 per cent from a year earlier. They now stand at $11.50 psf per month.
DTZ Research added that in the near term, the only major new completion within the CBD is CapitaGreen, which will add 700,000 sq ft later this year.
Almost half of the new office supply in the next 18 months will be in decentralised areas, it said.
Therefore, rents in the CBD are expected to grow at a healthy rate of between 10 and 15 per cent this year, "as robust demand amid an environment of high occupancy rates will reinforce the landlords' bargaining power".
But Ms Lee Lay Keng, DTZ's regional head (SEA) of research, said strong rental growth may not be sustainable for long owing to supply-side pressures in 2016.
[email protected]
Office occupancy rates still rising in Q1
Published on Apr 4, 2014
By Rennie Whang
THE strong take-up rate of office space in the second half of last year has continued into the first quarter of this year, a new report has found.
Property consultancy DTZ Research said occupancy rates kept climbing in the Central Business District (CBD), driving rents up.
The increase in occupied space in the first quarter over the fourth quarter of last year was about 572,000 sq ft, indicating consistent quarter-on-quarter improvement in take-up since the second quarter of last year, it said.
The main drivers of demand were tenants taking out extra space in existing buildings or larger space at new premises.
For example, Google took additional space in Asia Square Tower 1 while Shell leased more space when relocating to the Metropolis.
"Shadow space" - excess space tenants have leased but wish to sublet to ease the rental burden - was estimated to be about 270,000 sq ft in the first quarter.
That is the highest level since the second quarter of 2012 but DTZ Research said it is expected to be quickly absorbed.
The largest proportion of shadow space in the first quarter was in outlying areas after the Ministry of National Development put up several floors in Jem for sub-lease. Several firms have already indicated keen interest in sub-leasing this space.
Islandwide, the occupancy rate in the first quarter rose 0.4 percentage point to 95.1 per cent.
Average gross rents rose 4.2 per cent in the Raffles Place area to $9.95 per sq ft (psf) while they rose 3.9 per cent to $8 psf in the Shenton Way, Robinson Road and Cecil Street areas.
Rents in these areas increased by an average of 8.8 per cent from last year.
In Marina Bay, with only premium grade buildings, average gross rents have risen even higher, by 4.5 per cent from last quarter and 9.5 per cent from a year earlier. They now stand at $11.50 psf per month.
DTZ Research added that in the near term, the only major new completion within the CBD is CapitaGreen, which will add 700,000 sq ft later this year.
Almost half of the new office supply in the next 18 months will be in decentralised areas, it said.
Therefore, rents in the CBD are expected to grow at a healthy rate of between 10 and 15 per cent this year, "as robust demand amid an environment of high occupancy rates will reinforce the landlords' bargaining power".
But Ms Lee Lay Keng, DTZ's regional head (SEA) of research, said strong rental growth may not be sustainable for long owing to supply-side pressures in 2016.
[email protected]