Grade A office occupancy in its lowest level in six quarters

Average CBD occupancy slumped to 92.6% in Q3 2011 from 93.5% in the previous quarter.

According to Colliers International, a spate of adverse reports relating to the US and Eurozone’s stalled economies as well as their debt woes filled headline news in 3Q 2011, which sent tremors down the global financial system. This resulted in a general slowdown across all sectors of Singapore’s economy, including the services producing industries.

Wary of the volatility in the market, many companies took a longer time to commit to new space as they turned cautious on expansion plans. Additionally, some companies were seen renewing their existing leases to avoid capital expenditure given the uncertain global economic conditions.

The office leasing market in 3Q 2011 was, hence, relatively quiet, apart from lease renewals and sporadic new take-ups in selected prime buildings which provided support to the market.

While lease renewals helped to keep Grade A office occupancy rates in the different micro-markets at a healthy level of above 90 per cent, the amount of space from new office completions and those returned by vacating tenants who had moved to newly completed buildings overshadowed that of overall new take-ups. As a result, average CBD Grade A office occupancy rates continued to slip from 93.5 per cent in 2Q 2011 to 92.6 per cent in 3Q 2011 – the lowest occupancy level in six quarters.

Weighed down by a tumultuous macro-economic environment and the ensuing softening in demand for office space, overall CBD Grade A office rents crept up by a mere two per cent in 3Q 2011 to S$9.08 per sq ft per month – the lowest quarterly growth since 2Q 2010.

The overall CBD Grade A rents were largely lifted by selected prime buildings in the Raffles Place/New Downtown micro-market which have strong offerings and, as such, the ability to sustain their rental stance.