Fears Singapore prime office rents too expensive misplaced

The uncertain global economic conditions have resulted in a relatively quiet leasing market in 3Q 2011 as many companies adopted a more cautious stand on expansionary plans, while others renewed their existing leases to avoid capital expenditure.

Temasek Holdings renewed and signed new leases at The Atrium@Orchard. In addition, Lion Global Investors relocated to OCBC Centre from One George Street and Red Hat Asia-Pacific renewed the leases for their office premises in AXA Tower in 3Q 2011.

Average CBD Grade A office occupancy rates continued to slip to 92.6% in 3Q 2011, the lowest level in six quarters, as there was more space available from both new office completions and those returned by outgoing tenants.

Overall CBD Grade A office rents edged up by 2% to S$9.08 per sq ft per month which is the lowest quarterly growth since 2Q 2010. Despite Singapore’s sound economic fundamentals, the fuzzy global economic outlook and ample office supply in the pipeline are expected to take a toll on business sentiments and affect demand for office space, thereby placing some downward pressure on rents and capital values in the coming quarters.