CBD Grade A office rents dip 0.7% in 3Q15

Rents will fall 2-3% further in 4Q15.

Multiple economic headwinds have pummeled prime office rents in Central Business District (CBD), according to a report by Knight Frank. Cost-conscious companies, subdued demand, and Singapore’s 0.1% YoY GDP gain have caused prime office rents to continue its decline.

Raffles Place/Marina Bay Grade A+ rents dipped 2.7% QoQ, and Grade A spaces suffered through a 0.7% decline. Tenants whose leases were expiring took advantage of the chance to negotiate rents. Thanks to the large upcoming supply of 3.8m sq ft of CBD office space in 2016, tenants had leverage.

Tanjong Pagar precinct Grade A office spaces inched back 0.6% as well. Demand was primarily for new buildings, as more efficient floor plates and better quality systems allowed for better optimisation of office space.

On the flip side, Guocco Tower enjoyed interest from flight-to-quality tenants and smaller companies who don’t need a core CBD address. Once the building come on-stream, more actions towards improvement of quality can be expected.

South Beach Tower also saw improvement in its occupancy level, with travel company Expedia leasing 26,000 sq ft of space. The high demand for South Beach Tower, however, was still unable to offset the sluggish demand for office space elsewhere in the district. Average rent for Bugis plateaued, while rents in City Hall dipped 0.5% QoQ.

Prime office rents in CBD are expected to fall 2-3% further in the year’s last quarter.