8.4% surge driven by banks with eye on private wealth management in Asia
OFFICE rents in Singapore continued to power ahead in the first quarter of this year, despite a slowdown in the US economy and possible fallout for Asia.
According to a Jones Lang LaSalle (JLL) report, the CBD core Grade A gross effective office rent now stands at $17.35 per sq ft per month - an increase of 8.4 per cent from $16 psf per month in Q4 2007.
Landlord's market: With an excess of demand over available space, landlords are able to increase rates on lease renewals. Grade A office vacancy rate remained below one per cent in the first quarter JLL said: ‘Amid a slowdown in the US economy, the Singapore office market remains positive with sustained rental growth recorded island-wide.’
Chris Archibold, JLL’s national director and head of commercial markets, said he was ‘quite surprised’ by the 8.4 per cent increase in Grade A rents, especially as it represents almost half of JLL’s projected rental increase of around 18 per cent for full-year 2008.
JLL says demand for CBD core office space continues to be driven by the banks and financial institutions, ‘many of which have set their sights on the burgeoning private wealth management in Asia’.
CBD core Grade B office rents rose by a more sanguine 11.2 per cent to $13.80 psf per month in Q1 2008 from Q4 2007. Noting the rise, Mr Archibold said CBD core Grade B office rents are ‘catching up’.
‘While Singapore office rental growth in Q1 2008 is some cause for optimism in this uncertain market, the increase in rental value is largely a spillover from the previous quarters,’ he said.
‘The supply environment will remain in the landlord’s favour for a few more quarters before any significant increase in supply tilts the balance towards the occupiers.’
Supply of office space here remains tight.
According to a report by CB Richard Ellis (CBRE), the Grade A vacancy rate remained below one per cent in the first quarter of the year, even though at 0.6 per cent it was slightly higher than the 0.2 per cent rate in Q4 2007.
CBRE executive director (office services) Moray Armstrong said: ‘There is currently an excess of demand over available space and landlords will still be able to achieve high rents on rent and lease renewals due to the absence of alternatives for occupiers. Further rental advancement is likely in selected buildings that enjoy full occupancy.’
According to CBRE, prime rents averaged $16 psf per month while Grade A rents averaged $18.65 psf per month in Q1 this year, reflecting respective increases of 6.7 per cent and 8.7 per cent from the preceding quarter.
CBRE noted that the rate of increase in Q1 2008 moderated compared with the four quarterly increases in 2007.
It also estimates that 10.3 million sq ft of office space could be completed between 2008 and 2012, the bulk of which will come on stream in 2010 and 2011.
Mr Armstrong said: ‘The overall volume of confirmed office supply does not appear excessive, but we believe the government needs to be sensitive to the forces of demand and supply - prudence in future Government Land Sales programmes is required.’
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