Older office buildings feel the sting as businesses relocate to newer developments

Leasing momentum has skyrocketed in upcoming prime offices.

The ball is now in older Grade-A office buildings’ court as businesses are quickly relocating to bigger and more efficient office spaces in newer developments.

According to a report by RHB Property, leasing momentum has jumped in upcoming prime offices, with Guoco Tower achieving pre-commitment leases of over 70%.

The new tenants that have signed include a mix of Finance and IT companies which include ING, Palo Alto Networks, Itcohu Singapore and Amadeus, the report noted.

“The effective rents are in the range of SGD7.50 psfpm to over SGD10 psfpm. The integrated development neat Tanjong Pagar MRT is expected to be completed by 4Q16,” the report added.

Additionally, Marina One Julius Baer is understood to have signed close to double-digit rent for a 100,000 sqft, RHB noted.

However, while the pickup in office leases is a good thing for the office market, the trend is expected to put further pressure in older Grade- A office buildings rents especially the leases that have been signed on peak of 2013/14 and are due for renewals.

“We expect office landlords to counter the trend by undertaking more AEIs or an outright sale taking advantage of strong office building transactions,” RHB noted.