High Rentals Don't Worry Some MNCs

Source : The Business Times, January 3, 2008

They are still expanding their premises: C&W report

RISING office rents may have forced some businesses to adopt a wait-and-see approach on expansion here but others are expanding anyway.

A report by Cushman & Wakefield (C&W) reveals that key leasing transactions in December 2007 include Swiss wealth manager Julius Baer taking up 26,000 sq ft of office space at HarbourFront Tower 1, US-based global engineering, construction and diversified services company Flour Daniel leasing 15,000 sq ft at 80 Robinson Road, and US-based drug development services company PharmaNet relocating to 5,000 sq ft premises at Springleaf Tower.

Bank Julius Baer was the fastest growing company in the finance and banking services sector in 2007 and its spokeswoman Lim Li Koon said that leasing the HarbourFront premises is part of its 'business continuity plan' strategy. Ms Lim also said that it would continue to operate out of its office at One George Street.

C&W managing director Donald Han said that the office market is experiencing a 'flight to availability of space for expansion' with tenants also hoping to take advantage of lower rents in the office sub-markets.

According to C&W, latest data showed that prime office net effective rents were at an average of $14.30 psf per month in November 2007, an increase of 3.5 per cent over October 2007.

Similarly net effective rents for the Top 25 Grade A office buildings rents rose to an average of $16.02 psf per month in November 2007 from $15.54 psf per month in October 2007.

Mr Han said many businesses in Grade A areas like Raffles Place, where occupancy is close to 100 per cent, are currently negotiating to renew their leases. 'Companies that need to be located close to their clients cannot move far from this comfort zone,' he said.

Those that can are looking outside the CBD. Average rents for the office sub-market in areas like Beach Road and HarbourFront are around $10-$11 psf per month.

'The secondary (sub) market is becoming the primary target for tenants looking to relocate at the moment,' Mr Han said.