This is why the Grade A office rental softened in 3Q12

A more diverse occupier demand extending beyond the financial services sector is to blame.

International property consultant, Colliers International’s latest quarterly research report revealed that a more diverse occupier demand – that extends beyond the financial services sector to include broad-based services firms such as those in the professional and legal services industries, insurance and commodity segments – has provided support in the moderation of Grade A office rental decline in Singapore in 3Q 2012.

This is despite the Singapore’s office property market continuing to writhe in 3Q 2012 on the back of a slowing global economy. Key concerns on the persistent Eurozone debt crisis, the faltering economic recovery of the United States and the slowing growth momentum of Asia continued to weigh on business confidence in the quarter.

These concerns, in turn, resulted in suppressed leasing activities among large space occupiers, including major banks and financial institutions, as they remained cautious of the uncertain economic conditions.

Mr Calvin Yeo (杨光伟), Executive Director of Office Services, Colliers International, says, “On a positive note, however, the challenging business environment also presented opportunities for tenants – both new and current – to take advantage of the softening rental situation.”

It is observed in 3Q 2012 that tenants who want to maintain their presence in Singapore took the chance to take flight to quality, while an increasing number of foreign companies expresses interest in setting up entities in Singapore to partake in Asia’s growth momentum and to diversify from the Eurozone’s shrinking economy.

Mr Yeo adds, “These companies range from the professional and legal services industries to the insurance, commodity, energy and private equity sectors. Noticeably, the majority of take-up in 3Q 2012 were of Grade A office space below 20,000 sq ft.”