Grade A office rents seen to surge 5% in 2014

That's $10.00 psf per month.

In its report, Macquarie Research is forecasting Grade A rent to rise 5% YoY to S$10.00 psf/mth in 2014, after bottoming at S$9.55 psf in end-2013 (flat YoY).

The modest recovery is attributed to the absence of sizeable demand from financial institutions (mainly banks), which have historically been a key driving force behind any significant increase in rents and occupancies. Similar to the past 2 years, sources of demand should remain diversified across various sectors, i.e. professional services, energy, commodities, insurance and IT.

While there is a scarcity of Grade A buildings completing in 2015, our rental growth outlook is 3% to S$10.30 psf, with the sizeable supply in 2016 capping any significant rental increase.

Grade A vacancies are expected at 9.0%, 8.4% and 2.5% in 2013, 2014 and 2015, respectively, which are lower vs. islandwide’s 11.6%, 12.0% and 10.2%. Grade B rents are also to remain flat YoY at S$7.50 psf/mth in 2013, before rising by a respective 3% and 1% to S$7.70 psf and S$7.80 psf in 2014 and 2015.