"The office leasing sector is likely to bottom out in late 2013 as leasing activity picks up," said Louise Toovey, senior manager of office leasing at Knight Frank Singapore. "Rental increases are likely to be marginal."
In its quarterly research bulletin released yesterday, Knight Frank expects "overall islandwide rents to remain flat with a possibility of marginal increases of around 0.5 per cent towards the end of 2013".
This is against a backdrop of an overall continued downward rental trend this quarter, with a 2.3 per cent quarter-on-quarter drop in rents for grade A+ office space in the Marina Bay and Raffles Place area.
It attributed this to the completion of Asia Square Tower 2 in the Central Business District (CBD), which is slated for Q3 2013. Prime rents should only be marginally affected, said Knight Frank, given its current estimated pre-commitment rate of 30 per cent.
Knight Frank also foresees a decline in rents in the Shenton Way/Tanjong Pagar and Robinson Road precinct due to the ongoing construction of buildings in the area, posing negative externalities such as noise inconveniences.
Such buildings include V on Shenton, Oxley Tower and SBF Center.
"However, overall leasing activity in the next six months is expected to pick up, as enquiries and interests generated this quarter materialises into new tenancies," said Ms Toovey.
Also, suburban rents are likely to remain strong while the development of good quality new office buildings boosts overall average rents.
This is in view of the 2.12 million square feet of suburban office space expected to come on stream in 2013, with major developments such as The Metropolis at one-north and Jem at Jurong Gateway having high pre-committed rates.
Knight Frank expects the lower rents to allow Singapore to retain its competitive edge globally, this being enhanced by the entry of more certified Qualifying Foreign Law Practice firms.
This comes a few weeks after Colliers International's Q1 report, which predicted continued sinking rents and cited Singapore's regional hub status as something which could raise rental demand and offset price declines.
Source: Straits Times, 23 Apr 2013