CBD office rents 'bottoming out'


OFFICE rents in the Central Business District (CBD) look to be bottoming out after a period of decline, while those in the CBD fringe are rising, according to a DTZ report yesterday.

Occupancy rates have also climbed islandwide, largely due to a decrease in supply, the property consultancy added.

It found that average gross monthly office rents in Shenton Way held firm at $7.25 per sq ft (psf) in the second quarter from the preceding three months, while those in the Raffles Place area hovered at $9.30 psf. They were still down year on year, however: by 4 per cent in the Shenton Way zone and 2 per cent at Raffles Place.

Ms Lee Lay Keng, DTZ's head of Singapore research, said CBD rents could start rising in this half of the year if economic growth improves. But she added that demand from banks and financial services firms, which tend to pay higher rents, will likely remain "modest".

"Office demand will continue to be supported by the non-financial sectors such as the information technology, energy and infocomm and professional sectors, which have recorded more positive sentiment."

While the CBD is languishing, rents in some city fringe areas rose in the quarter to June 30 from the preceding quarter.

DTZ pointed to "sustained demand from a diversified tenant profile, additional demand from displaced tenants and the recent lack of new supply".

Average gross monthly rents in Orchard Road rose 2.3 per cent from the preceding quarter, while those in the Bras Basah/Selegie Road area grew 2.4 per cent. The jump was slightly larger in River Valley, where office rents rose 3.3 per cent from the previous quarter.

Average gross rents in other CBD fringe districts such as Marina Centre, Tanjong Pagar and Beach Road were largely unchanged from the first quarter.

DTZ noted that a number of tenants were displaced from the CBD because some office buildings went off the market for refurbishment or redevelopment.

These were located mostly around Shenton Way and included the entire Robinson Towers and its annex building, the International Factors Building, The Corporate Office, Cecil House and some floors in DBS Tower 1.

"Some of the displaced tenants from these older buildings due for redevelopment moved either into nearby buildings in the CBD or the CBD fringe, where rents can be about 10 per cent to 20 per cent lower."

DTZ estimated the buildings had a cumulative net lettable area of around 430,000 sq ft.

Taking such a large amount of office space off the market sent occupancy rates shooting up for the second quarter.

Islandwide occupancy rates went up from 95.4 per cent in the first quarter to 96.3 per cent in the second.

The biggest growth was in the Shenton Way area - up 3.3 percentage points to 94.8 per cent, while Raffles Place occupancy rates grew about 1 percentage point to 94.3 per cent.


Source: Straits Times, 4 Jul 2013