BUSINESSMEN have more to think about, following the rise in rentals for office, retail and industrial space. In the second quarter of the year, office space rentals climbed 11 per cent, up from the previous quarter’s 10.4 per cent.
For the first time, the Urban Redevelopment Authority (URA) released two sets of figures to reflect the two-tiered office market.
Category 1 includes office spaces in the downtown core and Orchard Planning area, while Category 2, comprising 80 per cent of all office space, accounts for the rest of Singapore.
The median rental for Category 1 was $9.50 psf monthly, up from $8.48 psf in the first quarter. In Category 2, the rates climbed from $4.23 psf to $4.48 psf.
“The pace of rental increase is maintained but maybe not as high as landlords wish us to believe,” said Mr Colin Tan, Chesterton International’s head of consultancy and research.
The vacancy rate continued to fall, from 9.1 per cent to 8 per cent by the end of the second quarter.
While an extra 641,000 sq m of office space will be available by 2010, Mr Tan said: “The supply is not much because historically, we have been able to absorb up to 4 million sq ft of space in good years,” he said.
In the retail sector, overall rentals increased by 7.1 per cent, a sharp rise from the 1.4-per-cent increase in the first three months of the year.
Median monthly rentals for shop space in Orchard were $9.24 psf. Rentals in city areas outside Orchard reached $6.21 psf and beyond the city area, $4.88 psf.
Although 221,100 sq m of factory space were granted temporary occupation permits in the second quarter, the industrial sector experienced cost spikes too. Rentals for multiple- user factory space increased by 6.1 per cent.
As for the seven-fold increase in demand for business park space, Knight Frank said this was “a spillover effect from the tight office market and an rise in the relocation of value-added manufacturing facilities from other countries”.
Mr Tan said: “The performance numbers show that the market is still moving forward, but that also means Singapore is slowly losing its competitiveness if these rises are not checked.”
Up to 515,000 sq m of gross floor area for shop space is expected to be completed by 2010. Similarly by then, 280,000 sq m of industrial space is expected to be introduced.
For now, the rise will not lead to businesses packing their bags for cheaper pastures.“Business costs does not consist of only rental costs. There is labour, material, utilities, transport, and so on,” explained Knight Frank’s Mr Nicholas Mak.
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