http://www.businesstimes.com.sg/arch...s-ura-20130427

Published April 27, 2013

Net absorption of office space rises in Q1 as vacancy rate falls: URA

Office rental index drop little changed at 0.2% in Q1; JLL says this suggests an inflection point is near in the leasing market

By Kalpana Rashiwala


URBAN Redevelopment Authority (URA) data show an uptick in net absorption of office space in Singapore, accompanied by a decline in vacancy rate.

Office leasing agents say this is in sync with their experience.

Although URA's overall office rental index continued to contract in Q1 2013, the decline has maintained, suggesting an inflection point is near in the leasing market, says Jones Lang LaSalle (JLL).

URA's office rental index dipped 0.2 per cent quarter on quarter in Q1, similar to the 0.3 per cent decline in Q4 last year.

Official numbers yesterday reflected a net increase in office demand of 269,098 sq ft in Q1, up from around 183,000 sq ft in the October to December period last year.

Islandwide, the office vacancy rate stood at 9.2 per cent at end-March, a slight decline from 9.4 per cent three months earlier.

CBRE's executive director (office services) Moray Armstrong said: "The upsurge in net absorption and declining vacancy rates as recorded by URA maps in with our observations on the leasing front. There has been strong leasing momentum across most market segments including both Grade A and Grade B.

"Office rents found support levels late last year and are fairly stable at this point."

The market is witnessing upward pressure on office rents in decentralised locations on the back of strong leasing commitment, he added.

Market watchers say leasing momentum is strong at The Metropolis in Buona Vista ahead of its completion this year. Monthly rents in the high-specification office development are thought to be heading towards $7 psf for whole-floor tenants, compared with around $6 psf a year ago.

In the CBD, CBRE expects Grade A rents to lead the return of rent growth. "The question, of course, is when. Based on the recent leasing activity, this may be earlier than previously expected (by end-2013/early-2014)," said Mr Armstrong. He points to a decline in the availability of office space over the past six months, both in recently completed Grade A developments and second-hand space, to illustrate the resilience of Singapore occupier demand in spite of continued external economic challenges.

According to CBRE's analysis, the amount of office space available for leasing in six Grade A office towers completed in the 2010-2012 period has fallen from 625,300 sq ft as at end-Q3 last year to 231,000 sq ft as at end-Q1 2013. The six are: Asia Square Tower 1, Marina Bay Financial Centre Towers 1, 2 and 3, Ocean Financial Centre and OUE Bayfront.

At eight older developments in the CBD, available office space has shrunk from 875,500 sq ft at end-Q3 2012 to 251,900 sq ft at end-Q1 2013. They are: Bank of Singapore Centre, Six Battery Road, One George Street, PWC Building, One Raffles Quay, 6 Shenton Way, Capital Tower and Millenia Tower.

CBRE's gross average monthly rental value for Grade A office space (which includes Marina Bay, Raffles Place and Marina Centre) stood at $9.55 psf in Q1 this year, down three cents from end-2012. JLL too said that based on its data, the gross effective monthly rent for prime Grade A offices in Raffles Place was stable at $8.90 psf, similar to the level in Q4.