This reverses the waning of premium-office rents that started in the fourth quarter of 2011; rents in the central business district on the whole had been falling for several quarters, amid worries of an oversupply and competition from new premises in the area.
Colliers International said in a report yesterday that the average gross monthly rent for this micro market in Q2 was $9.60 per square foot (psf), 2 per cent higher than the previous quarter's $9.41 psf.
The global commercial real estate company classifies premium-grade office space as that in new buildings with the highest specifications in Raffles Place and the New Downtown; examples are Asia Square and Marina Bay Financial Centre.
Marcus Loo, the executive director of office services at Colliers, said yesterday that with the rents for premium-grade offices having been soft since late 2011, tenants took the opportunity to upgrade to newer, better premises.
This seems to have borne itself out in the second quarter. For example, IHS Global moved its operations to Asia Square Tower 1, and National Australia Bank and Swiss Reinsurance Company set up at Asia Square Tower 2.
Meanwhile, the New Downtown area in Marina Bay continued to attract tenants in Q2, as it shapes up as the country's new financial centre.
This demand nudged landlords to maintain or increase asking rents, leading to a broad stabilisation of rents, Mr Loo said.
Average occupancy rates also rose in nearly all the micro-markets in Q2 over the previous quarter, except for the Beach Road and City Fringe segments.
Colliers said rents may continue to rise in the second half of the year.
Its director of research and advisory Chia Siew Chuin was especially upbeat on premium-grade offices; she said she expects rents to grow 5 per cent as market sentiments improve and as more tenants demand modern and efficient floor layouts.
Other segments could stay "relatively flat with some marginal upsides".
On the sales front, strata-titled offices remained popular in the second quarter. Record prices were set for units at Samsung Hub and Springleaf Tower.
But average prices stayed at $2,640 psf premium office space, and $2,390 psf for Grade A space in Raffles Place and the New Downtown from the previous quarter, with subdued activity.
Ms Chia said: "Strengthened by the bottoming-out of office rents, overall office capital values have the potential to climb by another 2 to 3 per cent in the next six months."
She believes office properties remain attractive to end-users and investors with a long investment horizon, helped by the low interest rate and high liquidity environment.
Source: Business Times, 9 Jul 2013
Prime office space rents up for first time since 2011
RENTS of top-grade office space in Raffles Place and Marina Bay increased for the first time in seven quarters while occupancy rates continued to rise there, signalling that a recovery in the segment may be afoot.
Average monthly gross rents of premium-grade office space in these areas climbed 2 per cent in the three months to June 30 to $9.60 per sq ft (psf) from the previous quarter, according to Colliers International's latest quarterly research report yesterday.
This was the first rise in rentals for such office space since a sustained period of decline that began in the fourth quarter of 2011.
Mr Marcus Loo, Colliers International executive director of office services, said: "Office buildings located in the Raffles Place and New Downtown (downtown Marina) micro-market have continued to draw interest from tenants."
As the development of Marina financial district and supporting road and public transport infrastructure picked up pace, demand rose in the quarter, he added.
But in the broader Central Business District (CBD), the average monthly gross rent of both premium and Grade A office space was $8.42 psf during the second quarter, relatively unchanged from $8.41 psf in the previous quarter.
Mr Loo noted that as tenants still favoured better-quality office space, landlords were able to either maintain or increase rents in the CBD.
While office rents were stabilising in the broader market during the quarter, Mr Loo said the recovery is more encouraging in premium-grade developments.
This was reflected in the occupancy rate for top-grade office space in Raffles Place and downtown Marina, rising to 93.5 per cent in the second quarter from 90.2 per cent in the previous quarter - the fifth consecutive quarter that it has risen.
Demand for the prime office space came mainly from financial and business service companies, said Colliers International.
Among them were National Australia Bank and Swiss Reinsurance Company, which committed to take up space at Asia Square Tower 2.
Occupancy rates in most of the other parts of the CBD also rose during the quarter, except those for the city fringe and Beach Road area, which fell slightly.
Separately, a DTZ Research report also released yesterday showed that the level of activity from foreign investors in the local property sector surged in the second quarter.
Foreign investment activity jumped to $1.4 billion from a mere $200 million in the first quarter, driven by Asian investors who accounted for 80 per cent of the total. Among the deals involving foreign players were Qingjian Realty (South Pacific) Group from China winning the tender for two Government Land Sales sites, and Australian developer Lend Lease selling its stake in Jem mall in Jurong East.
Meanwhile, another report from Knight Frank showed that total property investment sales plunged 30.3 per cent to $10.3 billion in the first half of this year from a year earlier, due to a sharp decline in private investment sales.
Source: Straits Times, 9 Jul 2013