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Office Listing
Rental Guide |
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Rates soften by a further 15% this year
January 2010
Demand for office space has already begun to pick up, after the pace of activity was reduced to a crawl around the middle of 2009, and we expect this momentum to pick up. There are many leases coming up for renewal in 2010 along with all those tenants who extended their leases last year for just one more year. We expect the new schemes to attract strong interest, but most of them are high end projects and will not suit everybody. We still find many companies are very budget conscious, so there will still be a good market for the secondary space in quality buildings. The new schemes may offer some of the best value for money options - the established buildings will offer the competitive options.
Top prime office rates are currently around $8.50 psf and we expect rates to soften, even if demand does surge forward, by around 15% over the next twelve months. So top rates by the end of the year could be in the region of $7.25 psf and renewal rates might be even lower. Robinson Road/Shenton Way could come to around $5.00 - $5.50 psf (currently $6.00) by December 2010. Buildings in the Tanjong Pagar area will be under the most pressure but currently they enjoy a high occupancy rate so rates will probably firm in the region of $3.85 - $4.75 psf.
There is not much new supply coming on stream in the Orchard Road area so rate changes here will not be dramatic, but the high end buildings will be under pressure to compete and we expect the band to contract to between $5.00 and $7.00 psf for this location. Suntec City already has low vacancy levels as it has been reasonably competitive, but some larger landlords remain bullish on their rates because of this. As such average rates may come down to around $5.00 psf from the private landlords and $6.25 psf from the larger owners, by the end of the year.
With nearly 8 million sq ft of office space coming onto the market over the next 2 years we do not foresee the office market turning around any time soon. The tenant’s market should continue for the next two years up to mid 2012 by which time there will be a lull in new schemes coming to the market until 2015 when projects like South Beach (700,000 sq ft) are expected to come on stream. We are therefore heading back to normality and doubt we will ever see a repeat of the volatility/fluctuations that we witnessed in the market in 2008 which is good news for tenants/business. |
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