Chart of the Day: Finally, rents for office space edged up a tad 1%

Find out the areas with rising rents.

According to Maybank Kim Eng, the office REITs segment was recently abuzz with renewed interest from investors after the Urban Redevelopment Authority’s (URA) Office Property Rental Index recorded a ~1% YoY rise in rent for the Central Area and Central Region in both 3Q13 and 4Q13. 

The uptick came after four consecutive quarters of YoY decline.

Maybank Kim Eng attributes the rental rate rise to slower office completions in 2013, with Asia Square Tower 2 (780k sq ft of net lettable area or NLA) being the only development in the Central Area to obtain a Temporary Occupation Permit (TOP) in 3Q13.

Here's more from Maybank Kim Eng:

This came almost more than a year after the last major Grade A office buildings were completed, namely, One Raffles Place Tower 2 (TOP: 2Q-3Q12) and Marina Bay Financial Centre (MBFC) Tower 3 (TOP: 1Q12).

Since early 2013, office landlords have taken advantage of the relative lack of new supply to hold rents steady, with leasing activities for the most part driven by small-space occupiers from the energy and commodities, professional services and IT sectors.

Demand from large-space occupiers was more muted as the financial sector kept a tight lid on costs. This in turn helped Grade A completions such as MBFC Tower 3 and Asia Square Tower 1 to progressively fill up to over 90% occupancy rate. Booking.com, for example, took up 45k sq ft recently at MBFC Tower 3.

Asia Square Tower 2 is also 60% filled to date, with Mizuho Bank and Allianz as the anchor tenants alongside other tenants such as Swiss Re, National Australia Bank and Nikko Asset Management. One Raffles Place Tower 2 also achieved ~80% occupancy as of 4Q13. Figure 10 illustrates the existing tenants of these completed Grade A office developments.