Interest in city-fringe developments helps drive up business park leasing

20140130-st-interest-in-city-fringe-devt-drive-up-business-park-leasing BUSINESS parks enjoyed strong leasing demand last quarter, driven mainly by interest in new developments on the city fringe, according to a report by property consultancy CBRE.

At the Galaxis at Fusionopolis Phase 5 in North Buona Vista, 44 per cent of space was taken up last quarter, the report released yesterday said.

At Fusionpolis Phase 2A, only 10 per cent of space was available for rent, the report added.

"There have not been any new developments in the rest of the island, such as Changi Business Park and the International Business Park. That is why city-fringe developments drove demand," said Mr Michael Tay, executive director of office services at CBRE.

If upcoming built-to-suit developments are included, about 70 per cent of business park space being completed this year has already been reserved - and is expected to rise to 97 per cent in 2015.

Business park developer Ascendas is expected to complete built-to-suit projects such as the Standard Chartered Bank building in Changi Business Park this year and the Mediapolis in One North in 2015.

Overall, about 60 per cent of the new supply coming onstream in the next three years has been reserved, CBRE said.

Meanwhile, leasing demand at completed business parks was muted in the last quarter, as anchor tenants were moving out from older developments. Private bank Credit Suisse, for instance, shifted from The Signature in Changi Business Park to the newly built One@ Changi City.

"Leasing activity for such space has been relatively slower than that for new buildings," said Mr Tay.

This led the average vacancy rate to rise to 9.3 per cent for the three months to Dec 31, up from 7.5 per cent in the preceding quarter. As a result, average rents of business park space remained flat in the last quarter, staying at $5.40 per sq ft (psf) for city-fringe developments, and $3.85 psf for the rest of the island.

Mr Tay said that demand for space in business parks this year should remain strong as businesss continue to decentralise.

He added that the supply of office space is expected to stay tight, which might lead to spillover demand for business park space.

Rents are expected to edge up by 3 per cent to 5 per cent this year, in line with a projected 8 per cent increase in office rentals, he said.

Source: Straits Times, 30 Jan 2014