Stingy tenants flee the CBD as office rents hit record high

Rents will keep getting higher and higher.

A drastic supply squeeze in the central business district is causing an unprecedented rise in office rents. As landlords gain more pricing power, more tenants are choosing to flee the CBD in search of cheaper rents.

According to Knight Frank, rents in Raffles Place and Marina Bay jumped 8% year-on-year in the the third quarter, representing the fifth consecutive quarter of rental growth. Quarterly net absorption also hit a two-year high on back of positive business sentiment and significant leasing enquiries.

“Backed by stable economic growth and positive business sentiment, Singapore's office property market continue to see healthy leasing activity over the last three quarters. Business enterprises look for new spaces in search for choice location, quality and reasonable rents. Coupled with limited supply of new quality office spaces, rental growth of prime office spaces in the Central Business District continued its upward trajectory as landlords seek higher rents. However, there are increasing signs of resistance from tenants towards higher asking rentals. Relocation activity has picked up in recent months and is likely to gather pace as tenants actively seek new spaces other than core CBD locations,” said Alice Tan, Director & Head of Consultancy & Research for Knight Frank Singapore,

“For prime office spaces in Singapore, we expect annual rental growth of 10 per cent for 2014, and slower growth of 6 to 7 per cent next year,” she added.