'Healthy demand' for office space in Q4

Published on Jan 03, 2013

By Melissa Tan

DEMAND for office space remained healthy in the fourth quarter last year, which helped cushion rental declines, according to property consultancy Colliers International yesterday.

Occupancy rates for suburban Grade A offices - which include those in places such as Tampines and Jurong East - climbed to 95.6 per cent, a striking 4.3 percentage points higher than in the third quarter.

The bulk of the increase was driven by tenants taking up space in Tampines, particularly at the NTUC Income Tampines Junction block and the Abacus Plaza complex, said Colliers International research and advisory director Chia Siew Chuin.

Tenants at these buildings include Raffles Medical Group and Standard Chartered Bank.

The robust demand for Grade A suburban offices was partly due to some large tenants leaving the Central Business District (CBD) to save on costs in the wake of the cautious economic outlook, said Mr Calvin Yeo, executive director of office services at Colliers.

"Another contributing factor came from the demand by tenants who were previously sourcing or have been occupying industrial space, but no longer fall within the list of allowable users stipulated by the authorities," he added.

Mr Yeo also said better quality suburban office developments were helping boost demand.

Still, occupancy rates in suburban districts have not caught up with those in areas closer to the city centre.

City fringe Grade A office space retained the highest occupancy rate at 98.3 per cent in the three months to Dec 31. This area includes districts such as HarbourFront and Novena.

That was a decline from the sector's 98.7 per cent occupancy rate in the July-September quarter.

Overall, the average occupancy rate of Grade A offices in the CBD grew from 93.1 per cent in the third quarter to 94.1 per cent in the fourth quarter last year.

This was the highest occupancy level in almost two years, Colliers noted in its report.

The higher overall occupancy rates in the fourth quarter helped to offset rental declines for yet another quarter, it added,

Average monthly gross rents for Grade A office space in the CBD fell a smaller-than-expected 6.9 per cent for last year overall.

Colliers said the office property market is likely to continue to experience "firm" demand from occupiers and investors this year.

This is because "the banking scene in Singapore still receives interest from small to mid-sized banks who are seeking expansion. The Republic is also still the choice destination for private equity and venture capital firms investing in the region," it said.

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