Office rental rates in Singapore predicted to inch 4-6% higher this year

Steady growth in demand seen.

According to Phillip Securities Research, it does not foresee any major economic meltdown and believes the office rental growth will show similar trends as the GDP growth. It is expecting between 4-6% increase in office rental rates for FY2014.

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Since 2010, new office stock has increased by ~10.5mn sq ft in the central business district (CBD).

Most of the new office space is located in Marina Bay, recognized as the premium office area in Singapore. In 2013, the main theme of the market was centered on major large financial firms relocating their back office to the island fringe, in an attempt to lower costs.

Additionally, any increase in rental rates within the CBD area is largely due to minute tenants moving in and paying a premium for smaller spaces at top levels. We reckon that the effective rental rates are seemingly stagnant since 2H2012.

While the market grapples with the influx of supply previously, it has stabilized. Going forward, demand is expected to be incremental in nature and would like to be closely linked to the country’s economic situation.