INCREASED interest from financial, pharmaceutical, media and IT firms drove up demand for business park space in the first quarter, said consultancy CBRE yesterday.
New buildings with quality specifications in One North, Mapletree Business City, Changi Business Park and similar complexes had more inquiries and a higher take-up rate in the first three months of this year than in the last three months of last year.
Telecommunications firm Ericsson points to this "flight to quality". It signed a lease for 32,000 sq ft in One @ Changi City in the quarter, sealing its move from premises at the SLF Building in Thomson Road.
The trend has prompted older business parks and science parks to undergo facelifts and upgrade facilities to remain relevant, CBRE said.
The overall vacancy rate for the business park market was 6.4 per cent in the three months to March 30, down from 7.2 per cent in the preceding quarter.
Average rents have stayed at $3.80 per sq ft (psf) per month since the third quarter last year, CBRE said.
A DTZ report last week put average monthly rents for business park space at $4.35 psf while newer city-fringe space was going for between $5 and $6 psf per month.
CBRE's executive director of office services Michael Tay said that two distinct tiers are emerging in the business and science parks segment of the market, determined mostly by location.
He noted that rents at city fringe business parks, such as Mapletree Business City and One North, are around 20 per cent to 30 per cent higher than those at parks in outlying areas.
"Despite this premium, some occupiers are still attracted to these developments due to their location and quality," he said.
CBRE added that an impending surge in supply is expected to keep business and science park rents from increasing much further.
It pointed out that major tenants relocating from older to newer developments this year combined with possible downsizing could mean an extra 800,000 sq ft of business park space becoming available.
The bulk of this will come on stream between the second and third quarters.
On top of that, around 750,000 sq ft of this year's new business park space supply has yet to be pre-let.
CBRE's Mr Tay said the market's take-up of the total 1.55 million sq ft of additional supply would be an "acid test for the health of the business park market going forward, and a key factor in determining the direction rents will take in the medium-long term".
Source: Straits Times, 9 Apr 2013