CBD premium office rents surge amid tight supply

SINGAPORE — Rents of premium grade office space in the Raffles Place and New Downtown area surged the most in three years at 6.1 per cent in the third quarter from the second to S$11.67 per sq ft amid high occupancy rates in the central business district, real estate consultancy Colliers International said today (Oct 13).

In comparison, Grade A office rents in the same area rose by a milder 2.9 per cent to S$10.25 during the period, while the same category in the Shenton Way and Tanjong Pagar area also gained 2.9 per cent to S$8.83.

Colliers noted that occupancy in most office areas has surpassed the technical full occupancy rate of at 95 per cent, with Grade A space in Shenton Way and Tanjong Pagar reaching 99.4 per cent and while that in Raffles Place and New Downtown was at 97.2 per cent. The occupancy rate for premium office space in Raffles Place and New Downtown was 94.1 per cent.

The tight office market, Colliers said, has given landlords greater pricing power over tenants.

“With office rents being on a consistent uptrend….there is a growing divide between the type of space tenants desire and the amount of rent they can afford to pay for that space, as well as landlords’ rental expectations,” Colliers said in a statement.

While the Singapore economy is facing headwinds from slower growth in major developed economies and political uncertainties in various regions, Colliers said these challenges are not expected to derail the growth of the office property market here in the near term. Office space demand is expected to be more diversified, supported by industries such as the technology and info-communications, pharmaceuticals, banking and financial services, energy and others.

On the market’s near-term outlook, Colliers said it could see temporary moderation in occupancy when some 1.7 million sq ft of new supply comes on stream with the completion of developments such as CapitaGreen in the Raffles and New Downtown area and the South Beach Tower in the Marina and City Hall area. But rents are expected to continue growing for the rest of the year.