Race for space: Singapore office rents hit record high in Q2

And they will only climb further.

Firms looking to establish their headquarters in the country will need to be prepared to fork out more cash. Singapore’s office rents reached a thirty-month high in 2Q14, as premium office reached near-full occupancy rates by the end of June.

According to a report by Colliers, a new wave of leasing activity and a declining supply pushed Premium Grade office space to a two-and-a-half-year high of $11 per sq ft, as the overall average monthly gross rents for Premium and Grade A office space in the CBD also hit record levels.

“In the first six months of 2014, rents for Premium Grade office space in the Raffles Place/New Downtown micro-market have escalated by some 6.8% and those for the overall Premium and Grade A office space in the CBD have gained 4.4%, correspondingly,” the report stated.

Here’s more from Colliers:

As a result of this new wave of leasing activity spurred by improved business confidence, all Grade A office micro-markets have breached the technical full occupancy rate of 95% by the end of June 2014, with the tightest rate of 99.4% recorded for the Shenton Way/Tanjong Pagar micro-market.

Although the occupancy rate of Premium Grade office space in the Raffles Place/New Downtown micro-market has yet to hit the technical full occupancy mark, it has edged closer, having risen 0.6 percentage point to 93.4% as of 2Q 2014. This is also the highest occupancy level achieved in four quarters.

The overall tightening of office occupancy islandwide gave landlords the mandate to raise their rent expectations across the market, although companies’ cautious stances towards large occupancy cost increases kept rental growth contained to below 3.5% in the April to June 2014 quarter.

The office property market is expected to continue to strengthen for the rest of 2014. The restoration of business confidence is expected to gather pace on the back of the brightening outlook for the global economy. This will likely pave the way for more firms to embark on expansion plans.