http://www.straitstimes.com/archive/...a-pac-20150213

CBD rents up 14%, strongest growth in Asia-Pac

Published on Feb 13, 2015

By Rennie Whang


RENTS in the central business district shot up around 14 per cent last year - the strongest rise in the Asia-Pacific - but the momentum won't last, according to a report yesterday.

Consultancy JLL said the pace of increase is likely to slow within months despite the tight supply situation as a large influx of new space is looming.

Landlords had their way late last year, with demand for CBD office space in the fourth quarter boosted by a mix of expansion and relocation activities across various segments, including small financial institutions, said JLL.

Consumer goods, IT and social media firms also took up space, with LinkedIn, Facebook and Twitter moving into the CBD over the quarter.

The net take-up in the CBD was positive, at about 624,307 sq ft in the three months to Dec 31, while the vacancy rate remained stable at 6.1 per cent. Office rents rose to $8.90 psf a month as at the end of the fourth quarter, up from $8.78 in the third quarter.

Supply was added in the form of CapitaGreen, which has 700,000 sq ft of net lettable area.

JLL said office demand could rise with the growth of IT and business advisory services ahead of the formation of the Asean Economic Community later this year.

But rental growth is likely to be dampened due to new supply coming onstream next year, with pre-leasing likely to start this year. A large amount of space, especially at Marina One, is expected to add at least 1.5 million sq ft to the market. "This is likely to add pressure on landlords to lock in existing tenants by offering attractive rental rates, or longer lease periods," JLL said.

It added that modest economic growth of 2.8 per cent last year and only 3 per cent tipped for this year, plus uncertainties in major economies, "may prompt some companies to adopt a more cautionary approach towards expansion".

The total value of CBD sales transactions fell 84.5 per cent from the third quarter to $194 million in the fourth quarter, mainly because there were no major transactions en bloc.

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