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Thread: S'pore Grade A office rents continue to rise in Q1

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    Default S'pore Grade A office rents continue to rise in Q1

    Published April 8, 2008

    S'pore Grade A office rents continue to rise in Q1

    8.4% surge driven by banks with eye on private wealth management in Asia

    By ARTHUR SIM


    OFFICE rents in Singapore continued to power ahead in the first quarter of this year, despite a slowdown in the US economy and possible fallout for Asia.

    According to a Jones Lang LaSalle (JLL) report, the CBD core Grade A gross effective office rent now stands at $17.35 per sq ft per month - an increase of 8.4 per cent from $16 psf per month in Q4 2007.

    JLL said: 'Amid a slowdown in the US economy, the Singapore office market remains positive with sustained rental growth recorded island-wide.'

    Chris Archibold, JLL's national director and head of commercial markets, said he was 'quite surprised' by the 8.4 per cent increase in Grade A rents, especially as it represents almost half of JLL's projected rental increase of around 18 per cent for full-year 2008.

    JLL says demand for CBD core office space continues to be driven by the banks and financial institutions, 'many of which have set their sights on the burgeoning private wealth management in Asia'.

    CBD core Grade B office rents rose by a more sanguine 11.2 per cent to $13.80 psf per month in Q1 2008 from Q4 2007. Noting the rise, Mr Archibold said CBD core Grade B office rents are 'catching up'.

    'While Singapore office rental growth in Q1 2008 is some cause for optimism in this uncertain market, the increase in rental value is largely a spillover from the previous quarters,' he said.

    'The supply environment will remain in the landlord's favour for a few more quarters before any significant increase in supply tilts the balance towards the occupiers.'

    Supply of office space here remains tight.

    According to a report by CB Richard Ellis (CBRE), the Grade A vacancy rate remained below one per cent in the first quarter of the year, even though at 0.6 per cent it was slightly higher than the 0.2 per cent rate in Q4 2007.

    CBRE executive director (office services) Moray Armstrong said: 'There is currently an excess of demand over available space and landlords will still be able to achieve high rents on rent and lease renewals due to the absence of alternatives for occupiers. Further rental advancement is likely in selected buildings that enjoy full occupancy.'

    According to CBRE, prime rents averaged $16 psf per month while Grade A rents averaged $18.65 psf per month in Q1 this year, reflecting respective increases of 6.7 per cent and 8.7 per cent from the preceding quarter.

    CBRE noted that the rate of increase in Q1 2008 moderated compared with the four quarterly increases in 2007.

    It also estimates that 10.3 million sq ft of office space could be completed between 2008 and 2012, the bulk of which will come on stream in 2010 and 2011.

    Mr Armstrong said: 'The overall volume of confirmed office supply does not appear excessive, but we believe the government needs to be sensitive to the forces of demand and supply - prudence in future Government Land Sales programmes is required.'

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    Default Re: S'pore Grade A office rents continue to rise in Q1

    April 8, 2008

    Office rents moderate in first quarter of this year

    Figures expected to stay strong due to high demand, tight supply, says CBRE

    By Jessica Cheam


    THE verdict is in: prime office rents - which shot up last year - have slowed down in the first three months of this year.

    Like residential property, office rentals did appreciate in the first quarter but at a slower pace than in the four quarters last year, said property consultancy CB Richard Ellis (CBRE).

    But unlike homes, offices will still be able to achieve high rents due to strong demand and a lack of supply, said CBRE in a report released yesterday.

    Prime office rents were up 6.7 per cent at an average of $16 per sq ft (psf) per month in the first quarter, while Grade A office space - the best grade of space - climbed 8.7 per cent to average $18.65 psf.

    By comparison, quarterly rises for Grade A space last year ranged from 13.7 to 23.6 per cent and 10.3 to 25.6 per cent for prime office rents.

    CBRE said rising rents coupled with the lack of space in the Central Business District (CBD) led some companies to relocate to refurbished state properties such as 991 Alexandra Road and the Phillip Investors Centre at the former Moulmein Community Centre.

    Supply remains tight with occupancy levels at 97.6 per cent in the core CBD and 97 per cent in decentralised areas.

    Grade A vacancy remained below 1 per cent, but increased slightly from 0.2 per cent in the fourth quarter of last year, to 0.6 per cent in the first quarter of this year.

    CBRE estimated that about 10.3 million sq ft of office space could be completed by 2012, with the bulk coming online in 2010 and 2011.

    On the supply side, a transitional office site that could yield 180,000 sq ft at Mountbatten Road was awarded in January. Also, two sites at Scotts Road and Anthony Road, comprising 243,191 sq ft in total, were launched by the Urban Redevelopment Authority in late February but have yet to be awarded.

    Government agencies are also slated to relocate from the CBD, freeing up 212,000 sq ft of office space.

    CBRE's executive director of office services, Mr Moray Armstrong, said given the significant supply to come in the next few years, 'we expect some landlords may start to moderate rental expectations'.

    The office market 'is likely to stabilise' and the supply does not seem excessive, but Mr Armstrong added that the government needs to be 'sensitive to the forces of demand and supply' and exercise prudence in future land sales.

    He also added that pre-leasing activities are strong, especially in decentralised areas such as Tampines, Changi, Alexandra and HarbourFront due to cost-cutting measures taken by multinational companies.

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