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Office Listing
Rental Guide |
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Marker rising and falling at the same time
July 2010
We note some landlords are very upbeat about the future, expecting sustained rental growth next year. However, we believe that even though the new schemes for next year have succeeded in securing significant pre-lets, such a large amount of space coming on stream in such a short period of time, is bound to have a dampening effect on any rental growth.
Notwithstanding this, we do not expect rates to dive but there maybe be longer void periods as the landlords wait for the slack to be taken up. If one looks a little further down the line, it is surprising to note that there are no new major office schemes planned in the CBD for 2012. There is only 1 major project scheduled for completion in 2013 and no further schemes due to come on line in 2014.
We therefore expect rentals to be stable for some while to come. We are already close to the bottom end of the rental cycle, with high end offices firming but the mass market is still sluggish. Raffles Place will clearly be affected by the flood of supply and there should be some excellent choices with very attractive packages in this location early next year. We expect demand to pick up early next year but overall demand still remains uncertain and it is difficult to predict how long it will take for the new supply to be absorbed.
Whilst the over supply may take one to two years to correct itself, the overhang should have been taken up by 2013. By that time, only one new scheme will be available for lease in the middle of 2013 (Asia Square Tower 2) and no further schemes planned for the next two years until the next project at South Beach in 2015. This scheme is a Norman Foster designed development located on the old army barracks opposite Raffles Hotel and undertaken by City Developments. It will provide a much needed 1 million sq ft of office space in what could be by then a tight market yet again in five years time.
It is hoped that other sites slated for office large office developments such as Rochor Road/Beach Road/Ophir Road will be progressed in 2011/2012 to avoid a supply shortage in 2015 similar to what we witnessed in 2007/08 because the market was so weak in 2003. |
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