Robust demand for Singaporean office space was largely spurred by the fact that rents have been kept in check during the first quarter of 2013, with positive momentum for demand expected to last through the rest of the year.
Reports compiled by property consultancies show that, thanks largely to competitive rents, demand for office space has remained robust during Q1 of 2013.
According to CBRE, Singapore office vacancy rates have fallen by 0.7% from 5.8% in Q4 of 2012, to 5.1% in the most recent quarter. These conclusions coincide with findings from DTZ, which observed occupancy rates reach 95.4%, an upsurge of nearly 0.4 percent.
Current vacancy rates have not been this low since Q4 of 2008, confirms CBRE, when the rate reached 4.8% back then.
DTZ’s findings are that net absorption was up, from 272,000 sq. ft. in Q2-2012; to 375,000 sq. ft. this latest quarter.
CBRE pegs lower rental costs as the primary reason for the strong demand in Singapore compared to other cities, and forecasts this momentum to last throughout the remainder of the year.
According to the CBRE, “Most of the rental declines occurred in the first two quarters of 2012, and rental corrections were kept to a minimum in Q1 2013,”
Grade A office space saw rental values reach $9.55/sq ft per month (PSFPM), which was a decline of 0.3% from Q1 of 2012. Vacancy rates also declined, from 8.8% in Q1 last year to 7.1% in Q1 2013.
According to CBRE data, rents for Grade B office properties fell by 0.3% from the last quarter, reaching $7.09 PSFPM. Q1 2013 also saw improvement in the vacancy rates, down from 5.9% last quarter to 5.4% in the most recent quarter.
According to the Q1 2013 figures compiled by DTZ, not since the first quarter of 2011 have average occupancy rates in Raffles Place bean higher than those in Marina Bay.
DTZ’s Executive Director for Business Space, Cheng Siw Ying, confirmed that a 12.5% fall in rent last year was what spurred activity in Marina Bay.
“In comparison, rents in Raffles Place continued to decline moderately as landlords with lower occupancies offer incentives such as longer rent holidays to retain or entice tenants to lease space in their buildings.”
The real estate consulting firms forecast that there will be supply of office space totalling almost 2.5 million sq. ft. in the coming year, with noteworthy projects including the Jurong East-based JEM, the CBD-based Asia Square Tower 2, Nexus@ one-North and the Metropolis.
CBRE believes demand for the space is easily managed since the combined 1.5 million sq. ft. of space in both the JME and Metropolis projects have 100% and 70% pre-commitments respectively. Comparatively, Asia Square Tower 2 has pre-commitment levels of around 12%.
Drawing parallels between Asia square 2 and the decentralization of office property developments, the Head of DTZ’s Singapore research wing Lee Lay Keng commented:
“Office rents are therefore expected to hold firm in the decentralised areas while rents in the CBD will continue to ease before recovering next year.”