http://www.straitstimes.com/archive/...liers-20150108

Office rents to rise this year, says Colliers

Report cites healthy demand and positive economic environment

Published on Jan 8, 2015 1:39 AM

By Jacqueline Woo


OFFICE rental growth in Singapore will continue to be driven by healthy demand amid a cautious but positive economic environment, said a report yesterday.

Rents of premium-grade office space in the Raffles Place/New Downtown sector are likely to climb 10 to 15 per cent for the whole of this year, said the report by Colliers International.

And rents for Grade A and B office space across the Central Business District (CBD) could rise by up to 10 per cent.

Rental growth for premium-grade office space in the Raffles Place/New Downtown sector eased to 2.2 per cent in the fourth quarter of 2014, after a 6.1 per cent quarter-on-quarter spurt in the third. Rents averaged $11.93 per sq ft (psf) last month, marking full-year growth of 15.8 per cent last year.

The average monthly gross rents for Grade A and B office space across the CBD held firm or edged up by 1.9 per cent quarter-on-quarter in the fourth quarter of last year. Rents for Grade A and B office space gained 6.8 per cent and 4.9 per cent year-on-year respectively to $9.23 psf and $8.09 psf as of last month.

While overall occupancy rates of premium-grade and Grade A office space islandwide slid two percentage points to 94.8 per cent in the three months to December, the market is expected to see a "gradual rebound" this year.

The fall in occupancy rates was largely due to the addition of about one million sq ft of office space as two major projects - CapitaGreen and Westgate Tower - were completed in the fourth quarter of last year.

"Favourable demand drivers - such as a positive economic environment and the strong appeal of Singapore as the preferred business location - as well as the expected decrease in supply of new office space to about 1.1 million sq ft this year will likely provide a window for some of the space completed in 2014 to be gradually absorbed over the next 11 months," noted Ms Chia Siew Chuin, director of research and advisory at Colliers International.

But leasing market sentiment could be dampened due to a rise in secondary office space stock on the market, said executive director of office services Marcus Loo.

This could happen as some firms rationalise their space utilisation or relocate to new office developments. "More importantly, the current collapse in world oil prices has set off a contagious fear among investors, affecting global markets, and we expect this apprehension to perpetuate throughout the rest of the year," he said.

Prices for premium-grade and Grade A office space in the Raffles Place/New Downtown area could grow as much as 5 per cent this year, said the report. The average capital values of premium-grade office space in the area rose 4.2 per cent last year, from 1 per cent in 2013; while that of Grade A office space rose 4 per cent, outpacing 2013's 0.2 per cent growth.

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