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Thread: Office occupancy rates still rising in Q1

  1. #1
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    Default Office occupancy rates still rising in Q1

    http://www.straitstimes.com/archive/...ng-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.

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  2. #2
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    Default Strong take-up in office leasing market for Q1

    http://www.businesstimes.com.sg/arch...et-q1-20140404

    Published April 04, 2014

    Strong take-up in office leasing market for Q1

    Gross average rents rise 3.9-4.5% on improved occupancy

    By raphael lim [email protected]


    THE office leasing market recorded another quarter of strong take-up during Q1 this year, with average gross rental rates in the central business district (CBD) rising between 3.9 to 4.5 per cent quarter-on-quarter from higher occupancy rates, according to research by DTZ.

    Average monthly per square foot rents ranged between $8 in Shenton Way, Robinsons Road and Cecil Street, to around $11.50 in Marina Bay. Occupancy rates at these areas, at 97.9 per cent and 88.1 per cent respectively, were higher than the previous quarter.

    DTZ said it expects rents in the CBD to grow between 10 and 15 per cent this year - higher than its previous forecasts - with the momentum expected to continue until 2015 from limited supply.

    "Robust demand amid an environment of high occupancy rates will reinforce landlords' bargaining power," the company said in a statement yesterday.

    However, it added that strong rental growth may not be sustainable in the longer term due to an onslaught of supply.

    Lee Lay Keng, DTZ's regional head (SEA), research, said: "The three heavyweight developments, Guoco Tower by GuocoLand, and the two M+S sites MarinaOne and DUO are all scheduled to be completed in 2016."

    These developments, together with other smaller ones, will yield an estimated new office supply of almost four million sq ft in 2016, a record high.

    "While MarinaOne and Guoco Tower are likely to compete for the same tenants, there will also be increased competition for tenants from strata-titled developments such as Eon Shenton and Oxley Tower. This is likely to exert downward pressure on office rents until the market can effectively absorb the large supply," Ms Lee added.

    For Q1 2014, net absorption was around 572,000 sq ft, showing consistent quarter-on-quarter improvement since the second quarter of last year.

    Most of the demand in the quarter came from companies expanding within existing buildings, or taking up larger space in new premises.

    DTZ's executive director for business space, Cheng Siow Ying, said: "The first quarter of 2014 was characterised by waves of location shuffling, as movements into recently completed buildings like The Metropolis, Nexus @ one-north and Asia Square Tower 2 took place."

    Shadow space - excess space made available for subletting or reassignment by existing tenants - was estimated at around 270,000 sq ft for the the quarter, the highest since Q2 2012. The space, however, is expected to be absorbed quickly, as there has been significant interest, said DTZ.

    The company added that while demand from non-financial sectors continued to hold up, sentiment in the banking and finance sector for office space was mixed, as many banks sought to optimise resources and reduce costs.

    Across the island, office occupancy rates rose 0.4 percentage points quarter on quarter to 95.1 per cent. Around half of the new office supply between now and 2015 will be in decentralised areas, DTZ said.

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