Office space in the Central Business District has become even tighter, and dearer, according to a latest report by property consultant Cushman and Wakefield. Average rentals for offices in the prime areas are now at an average of S$11.50 per square foot, with buildings around Raffles Place most expensive to rent, priced as high as S$12.60 per square foot.
The report shows that rental rates in prime areas have surpassed the 1996 peaks by as much as 35 per cent, with the 99 per cent occupancy and 23 per cent quarterly jump in rents unprecedented.
It says the increase is fuelled by a combination of tight supply and fast-expanding businesses, particularly among financial institutions.
Says Donald Han, Managing Director, Cushman & Wakefield, "Almost every tenant is looking at expansion, and a lot of them are looking into expanding twice, or sometimes even three times more than what they are presently having, in terms of square footage. So it's unprecedented."
This means more companies are now looking outside the prime districts to locate some of their operations.
Last month, HSBC and DBS each leased over 100,000 square feet of space in the Comtech building, off Alexandra Road, for their non-core services such as call centres.
"A lot of tenants are now looking at potential ways to reduce total occupancy costs by moving some of their back-end operations into decentralised areas, into business parks.
"If you're looking into the business parks rentals, it's only hovering at about S$3 per square foot. That is manageable. To pay S$15-S$20 per square foot is quite a high price for any big multinational corporation," says Han.
The spike in rentals has raised concerns that Singapore is becoming less cost-competitive.
To ease the supply crunch, the government has announced some measures.
It has put up for tender a short-term, or transitional, site for offices above Newton MRT station, which it says will take less than a year to develop.
"If it's successful, and I'm confident it will be, there will be more such sites that will come onto the market over the next 24 months. That helps because the supply crunch basically needs to be addressed from now till 2010, as the government sales of sites made known in the second half of this year will only come on-stream from 2010 onwards," says Han.
The Urban Redevelopment Authority (URA) says it will also release more detailed rental and vacancy data on offices from Friday, to provide a clearer perspective of the market. - CNA
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