Rise In Office Rentals Slows To 2.7% In July

Source : The Straits Times, 22 Aug 2007

PRIME office rents went up by 2.7 per cent last month, the slowest monthly rise so far this year, according to a report by consultancy Cushman & Wakefield yesterday.

Since January, office rents have been rising by 4.5 per cent to 9 per cent.

An acute supply crunch and burgeoning demand from expanding businesses in Singapore have been pushing up office rents since last year, prompting market watchers to air concerns over Singapore’s competitiveness.

Although rents overall grew at a slower pace last month, monthly rents for prime offices - those in the Central Business District, City Hall, Orchard and Bugis areas - were at record highs.

Rents in these areas hit $11.82 per sq ft (psf) last month, up from $11.51 psf in June, said Cushman & Wakefield.

Rents in the top 25 Grade A offices, which are in the best category of space in Singapore, rose 2.8 per cent to an average of $12.07 psf per month.

In sought-after Raffles Place, rents now average $12.96 psf per month, about 58.8 per cent above the last peak in June 1996.

At the very top end, City Developments’ Republic Plaza has achieved monthly rentals of $17.50 psf, the developer said earlier this month.

Cushman & Wakefield managing director Donald Han said rents, although still on the rise, should climb at a slower pace.

‘We are already at a very high base, so any increase cannot go up at the same rate of 4 to 5 per cent every month,’ he said. ‘At some stage, it’s got to slow down.’

Mr Han added that tenants are actively looking to minimise increases in their occupancy costs by relocating some operations outside high-priced central areas.

Recent moves by the Government to provide more data on the office market and assure tenants of ample future supply also seem to have paid off, said Mr Han.

‘I think that has had some impact in terms of tenants resisting high rentals by landlords,’ he said.

However, Mr Han believes the balance of power still lies with the landlords. ‘In general, we’re still looking at a mismatch between supply and demand,’ he said.

‘But moving forward, tenant relationships and finding quality tenants may become more important than trying to chase the highest rents in the marketplace.’