Office rents in CBD dipped 0.7% in March

Rates are at S$9.41 per sq ft.

International property consultant, Colliers International’s latest quarterly research report on the office property sector revealed that the office leasing market in the Central Business District (CBD) stayed relatively muted in 1Q 2013.

In general, new office space take-up remained slow in 1Q 2013, with leasing deals secured for smaller space users of 20,000 sq ft and below. Activities were dominated by office renewals, and to a smaller extent, flight to quality.

Against the backdrop of a subdued leasing market, office rents in the CBD stayed on the downtrend in 1Q 2013. Following a 0.5 per cent decline in 4Q 2012, the average monthly gross rents for both Premium 1 and Grade A2 office space in the CBD eased by another 0.7 per cent on a quarter-on-quarter (QoQ) basis to reach S$8.41 per sq ft as of March 2013.

Specifically, the average monthly gross rents for Premium Grade office space in the Raffles Place/New Downtown micro-market declined 1.4 per cent QoQ, and stood at S$9.41 per sq ft as of March 2013.

In contrast, rents in the city fringe and sub-urban micro-markets held firm for two and three successive quarters, respectively. This could be attributed to efforts by companies to explore more cost efficient office locations – resulting in a largely-resilient occupancy rate seen for completed stock, as well as healthy pre-commitment levels for projects under construction.

Additionally, the improvement in the offerings of new office buildings outside the CBD facilitated tenants’ relocation decisions.

This is a 23.2 per cent slide from the peak of S$12.25 per sq ft recorded in 3Q 2011. The decline was due to competition from new and upcoming office completions in the area.

Meanwhile, the growing vacancy pressures from the existing and potential secondary office stock that will be relinquished in the next five years resulted in a 1.3 per cent QoQ decline in the average monthly gross rents for Grade A office space in the Shenton Way/Tanjong Pagar and Marina/City Hall micro-markets.