Grade A office rents up 1.5% to $10.15 per sq ft per month

Rents at OUE Bayfront and Ocean Financial Centre have edged up more than 5.0% since their TOP in 1Q11.

Accordint to a release, rental values across the Asia Pacific region continued to grow with ongoing corporate expansion and hiring in 2Q11. Jones Lang LaSalle’s data shows that out of 27 office markets tracked, 15 registered increases in rents while the remainder stabilised or recorded small declines. In 2Q11, net effective rents for prime office space in Singapore came in just behind Hong Kong and Tokyo. Office rentals in Hong Kong continued to power ahead with 6.6% growth q-o-q as a result of both China’s continued economic strength and a supply crunch in Hong Kong.

Rental growth in the Singapore office market, on the other hand, moderated to a more sustainable rate in 2Q11 on the back of adequate supply being phased in. Jones Lang LaSalle’s data showed that the average CBD Prime Grade A gross effective rent increased 1.5% q-o- q to $10.15 per sq ft per month in 2Q11, up from $10.00 per sq ft per month in 1Q11. This translates to a 27.7% y-o-y increase from $7.95 in 2Q10.

Whilst landlords remain bullish there is now some concern in the market given the economic events playing out in the US and Europe.

The market continues to show strong interest in newly completed and upcoming Grade A buildings. Rents at newly completed buildings such as OUE Bayfront and Ocean Financial Centre have edged up more than 5.0% since their TOP in 1Q11 as they continue to attract tenants, who are now able to inspect the physical space.

Jones Lang LaSalle expects available space in the CBD Core to increase by about 2 million sq ft in 2H11, or about 7.5% of total CBD Core stock, with about 1.2 million sq ft of uncommitted space in the new developments and 800,000 sq ft of space given up by tenants relocating to the newer buildings. This will likely moderate rental increases over the next six months.

Chris Archibold, Head of Markets at Jones Lang LaSalle commented, “Demand for office space in the CBD Core remains strong and this has been reflected in the rental growth over the past few quarters, this is likely to moderate in the second half of 2011 given future supply but rental growth for 2012 and 2013 should be stronger based on the Singapore markets dynamics. However, this is very much dependant on how events play out in the US and Europe and how this affects sentiment and future demand.”

Dr. Chua Yang Liang, Head of Research for Singapore and Southeast Asia at Jones Lang LaSalle noted, “The strong growth in Singapore office rents in the past few quarters has already propelled the Singapore office market to among the most expensive in the Asia Pacific region. While the supply crunch in Hong Kong has caused rents to spike to almost double that at Raffles Place, Hong Kong’s proximity to China continues to be a big draw for front office jobs. While we expect some relocation to Singapore, we do not foresee a mass exodus.”

“The moderation in the growth rates in 2Q11 ensures that we do not get ahead of ourselves and remain competitive. This moderation is a healthy sign and together with ample supply in the market, we should expect rents to grow with the broader economy, rather than outpacing it like in 2008.” He added.

Photo credit: marboed