Grade A office rents dip again as demand crumbles

Rents slipped for the fourth consecutive quarter with the second half of 2012 bearing even graver prospects, says Savills Singapore.

The average monthly rent of CBD Grade A offices was S$8.47 per sq ft in Q2/2012, slipping 1.3% quarter-on-quarter (QoQ), in what has been a whole year of decline from peak rental levels of Q2/2011. 

“The leasing market experienced another quiet period with Grade A office rents slipping for the fourth consecutive quarter. There will be more challenges in the second half of 2012 in the wake of slowing demand and increasing vacancies,” it said in a new report.

"Amid the volatility in the world economy, the office leasing market in Singapore remained lukewarm in the second quarter of 2012. As with previous quarters, the market was dominated by leasing deals for smaller space, the demand for which came mainly from companies in the oil and gas and legal services industries," it added.

Data showed vacancy rates of CBD Grade A office space stood at 6.7% by the end of Q2/2012, with a higher vacancy rate is expected in late 2012 due to un-let premises in new completions, shadow space and at least 0.6 million sq ft of secondary stock.

But capital values of CBD Grade A offices held firm, supported by renewed investment activity.