New office projects report strong pre-commitment rates in 3Q

Guoco Tower, for example, has 75% prior to TOP.

Leasing activity in the new projects continued at a steady pace during the third quarter, notes Cushman & Wakefield.

The research house said that despite cautious business sentiment, pre-commitment rates in the new projects have significantly exceeded prior expectations, supported by take-up from a wide range of sectors including banking & financial services, technology, and professional services.

Guoco Tower achieved a strong precommitment rate of 75% prior to obtaining its Temporary Occupation Permit (TOP) in September, a notable improvement from its pre-commitment rate of 18% in the first quarter.

New tenants signed during the third quarter include Palo Alto Networks and Amadeus which leased 36,000 square feet (sf) each, and Itochu Singapore which took up 28,000 sf.

Meanwhile, Marina One’s pre-commitment rate rose to 35% ahead of its revised completion date in the first quarter of 2017. Swiss bank Julius Baer will be leasing a sizable 100,000 sf on the high density 28th floor, which is one of the largest floor plates in Asia.

In the third quarter, the overall Grade A CBD vacancy rate increased by 0.5 percentage point to 4.7%. Marina Bay’s vacancy rate declined to 3.7%, down from 5.5%. On the other hand, the vacancy rate in Raffles Place rose to 3.2%, up from 2.9%.

The overall Grade A CBD rent moderated by 2.5% to S$8.64 per square foot per month (psf/mo) in the third quarter. Marina Bay rents declined by 5.3% during the quarter to S$9.05 psf/mo, while rents in Raffles Place slid 3.4% to S$8.82 psf/mo.

Going forward, while it expects Grade A CBD rents will remain under pressure in the absence of a recovery in local economic growth, Cushman & Wakefield sees the degree of rental moderation to ease next year given the strong take-up of new projects and the significantly reduced supply pipeline after the first quarter of 2017.