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01-07-14, 12:20
http://www.straitstimes.com/archive/tuesday/premium/money/story/supply-crunch-sees-cbd-office-rents-rise-20140624
Supply crunch sees CBD office rents rise
But investors holding off buying as interest rate hikes loom, says JLL
Published on Jun 24, 2014 2:56 AM
By Melissa Tan
LIMITED supply is pushing up rents for offices in the central business district (CBD) but looming interest rate rises are deterring investors from buying, said property consultancy JLL.
Average CBD rents expanded 4 per cent to $9.96 per sq ft (psf) per month in the second quarter over the preceding three months, mainly due to the "stable take-up" by firms amid tightening vacancies, it said.
The increase was at a slightly faster rate than the 3.9 per cent rise in the first quarter this year from the previous quarter.
Mr Chris Archibold, head of markets at JLL, told The Straits Times yesterday that the growth in rents was "likely to continue through 2014 and the first half of 2015 as the market recovers on the back of a broad-based economic recovery".
Dr Chua Yang Liang, JLL's head of research for Singapore and South-east Asia, said in the report that demand in the second quarter was mainly driven by small firms and expansion by "large-space" firms in the consumer technology sector.
JLL said companies are "expected to continue showing a preference for good quality space in the CBD, which should support demand for space in upcoming new offices".
That should drive up average CBD office rentals by 16 per cent this year from last year, it said.
Dr Chua added that new supply was expected to be completed mainly in 2016.
Mr Archibold also said that a surge of new supply in the second half of 2016 would likely dampen rent increases.
CapitaGreen, a 700,000 sq ft office tower in the CBD, is expected to be completed by the end of this year.
The office components of mixed developments such as South Beach near Raffles Hotel, DUO in Bugis and Marina One in Marina Bay could also be completed within the next few years.
JLL noted that even though rents are rising, office price growth has been lagging behind.
"Increases in capital values of office space appear to be moderating as investors price in a potential rise in interest rates... notwithstanding the firm rental growth," it said.
The average price of CBD office space inched up 0.5 per cent in the second quarter from the three months before to $2,445 psf.
However, other analysts say office rental growth could be less than expected. A Credit Suisse report last week pointed out that higher business costs and a manpower crunch were making Singapore less attractive for firms, which could dampen office rental demand. CBD office pre-leasing has been "relatively slow" this year versus prior recovery years, it noted.
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Supply crunch sees CBD office rents rise
But investors holding off buying as interest rate hikes loom, says JLL
Published on Jun 24, 2014 2:56 AM
By Melissa Tan
LIMITED supply is pushing up rents for offices in the central business district (CBD) but looming interest rate rises are deterring investors from buying, said property consultancy JLL.
Average CBD rents expanded 4 per cent to $9.96 per sq ft (psf) per month in the second quarter over the preceding three months, mainly due to the "stable take-up" by firms amid tightening vacancies, it said.
The increase was at a slightly faster rate than the 3.9 per cent rise in the first quarter this year from the previous quarter.
Mr Chris Archibold, head of markets at JLL, told The Straits Times yesterday that the growth in rents was "likely to continue through 2014 and the first half of 2015 as the market recovers on the back of a broad-based economic recovery".
Dr Chua Yang Liang, JLL's head of research for Singapore and South-east Asia, said in the report that demand in the second quarter was mainly driven by small firms and expansion by "large-space" firms in the consumer technology sector.
JLL said companies are "expected to continue showing a preference for good quality space in the CBD, which should support demand for space in upcoming new offices".
That should drive up average CBD office rentals by 16 per cent this year from last year, it said.
Dr Chua added that new supply was expected to be completed mainly in 2016.
Mr Archibold also said that a surge of new supply in the second half of 2016 would likely dampen rent increases.
CapitaGreen, a 700,000 sq ft office tower in the CBD, is expected to be completed by the end of this year.
The office components of mixed developments such as South Beach near Raffles Hotel, DUO in Bugis and Marina One in Marina Bay could also be completed within the next few years.
JLL noted that even though rents are rising, office price growth has been lagging behind.
"Increases in capital values of office space appear to be moderating as investors price in a potential rise in interest rates... notwithstanding the firm rental growth," it said.
The average price of CBD office space inched up 0.5 per cent in the second quarter from the three months before to $2,445 psf.
However, other analysts say office rental growth could be less than expected. A Credit Suisse report last week pointed out that higher business costs and a manpower crunch were making Singapore less attractive for firms, which could dampen office rental demand. CBD office pre-leasing has been "relatively slow" this year versus prior recovery years, it noted.
[email protected]