Office Rents Still Up, Rising 15% In 3rd Quarter

Source : The Straits Times, Oct 27, 2007

OFFICE rentals, a major business cost, continued their relentless rise - up nearly 15 per cent in the third quarter - as the official vacancy rate for prime office space fell to just 2.8 per cent.

Recent uncertainty in global financial markets has had no discernible impact on office space demand, said property agency CB Richard Ellis (CBRE).

It cited figures from the Urban Redevelopment Authority (URA), which also showed that occupied office space rose by 645,840 sq ft in the third quarter, up nearly 54 per cent from 419,796 sq ft in the second quarter.

Overall, office rents rose by 14.8 per cent in the third quarter, compared with 11 per cent in the second quarter. And from the end of last year to Sept 30, office rentals have risen by 40.7 per cent.

These government figures confirmed industry statistics, which have showed a persistent climb in rents, particularly for quality space in the Central Business District, amid tight supply.

It has come to the point where some tenants are showing resistance to the rapid increases in rents, consultants said.

In URA’s prime office category, median rents of new leases reached $11.89 per sq ft (psf) per month in the third quarter, up from $10.33 psf per month in the earlier quarter.

In URA’s general category, accounting for 80 per cent of office space, median rent for contracts signed in the third quarter was $5.29 psf a month, up from $4.60 psf a month in the second quarter.

The growth in the prices of office space slowed a little to 8.1 per cent in the third quarter, from 8.9 per cent in the previous quarter.

In the past three quarters, prices of office space have risen by 22.7 per cent.

Vacancy for office space continues to fall as expected, with the rate for URA’s prime office space down to 2.8 per cent, from 5 per cent at the end of the second quarter.

The Government has said it will make more space available and has introduced transitional office sites for quick occupation.

Rentals could ease from 2010 onwards when more office buildings are ready, said Cushman & Wakefield’s managing director in Singapore, Mr Donald Han.