Monthly office rents held up better than expected in 2012

Rent growth is below the 10-15% market forecast.

Colliers International reports that the strengthening of occupancy rates, on the back of firm occupier demand, helped cushion rental decline for yet another quarter.

Average monthly gross rents for Grade A office space in the CBD, it says, reached S$8.32 per sq ft in December 2012, easing by 0.6 per cent on a quarter-on-quarter (QoQ) basis. This is the slowest pace of decline, since the market headed south exactly a year ago.

Consequently, for the entire 2012, the average monthly gross rents for Grade A office space in the CBD fell by only 6.9 per cent, lower than the 10-15 per cent decline that was forecast at the start of the year.  

According to Colliers, rents in 2012 had held up better than expected, primarily due to resilient occupier demand throughout the year – with majority of the tenants renewing their lease to ride out volatilities in the market.

Calvin Yeo (杨光伟), Colliers' Executive Director of Office Services, said  “Landlords’ increasing willingness to sub-divide their floor plates and negotiate with a wider tenant base have somewhat mitigated the vacancy rate that could have been formed from the stock of new and secondary office space released over the past 12 months.”

In the Raffles Place/New Downtown micro-market, the average monthly gross rents for Grade A office space fell 1.1 per cent QoQ in 4Q 2012 to S$9.16 per sq ft – half of the 2.2 per cent QoQ slide recorded in 3Q 2012. This brought the full year’s drop in rents to 11.2 per cent – the most significant decline among all micro-markets due to higher supply pressures from new office completions in the area.