More supply of small apartments drive rising rents in city fringe

Now guess how narrow the gap is between the rents in the prime districts and the rest of central region?

According to CB Richard Ellis, the gap between the rest of central region and core central region narrowed to 24.5 per cent in Q3 2011.

According to a release, CBRE’s latest analysis of residential non-landed rents points to a steady increase in rents in the Rest of Central Region since the rental market bottomed out in 2009. The Rest of Central Region (RCR) covers the city fringe areas of Balestier, Bishan, Geylang. Rents in the RCR stood at a median of $2.86psf at the height of the market in 2008. It fell to $2.64psf in 2009 but rose 19.3 per cent to $3.15 in 2010 when the market recovered. Rents in the RCR rose to $3.36 psf by Q3 2011.

Li Hiaw Ho, Executive Director, CBRE Research said “The increase in rents in the Rest of Central Region corresponds to the rise in the number of small-format sized apartments in Serangoon, Balestier and Geylang over the last few years. Renting in the city fringe area, near the CBD, is a viable option with more expatriates having switched over to local packages in recent years. Apartments in the Outside of Central Region near MRT stations have also risen in popularity.”

Average rents in the Outside of Central Region (OCR) have seen steady increases too. In 2010, rents increased 17.5 per cent to $2.68 psf from a low of $ 2.28 psf in 2009. Compared to RCR, rents in OCR have increased at a slower rate partly because of the large supply of HDB flats that are available for lease in the OCR.

Rents in the prime Core Central Region recorded a lower increase of 15.6 per cent over the 2009 – 2010 period compared to the RCR. Prime rents recovered to register $4.30psf in 2010, after having fallen to $3.72psf in 2009.

Since 2009, the gap between RCR and CCR has narrowed from 29.0 per cent in 2009 to 24.5 per cent in Q3 2011.

CBRE projects that the gap will probably stabilise at around 26 per cent by end of 2011 as rents in both CCR and RCR remain at current levels in the coming months.

Since 2008, the number of tenancies contracted, comprising new leases and renewals, has exceeded 30,000 every year. Between January and September 2011, the number of tenancies stood at 31,083. Total volume of tenancies will probably hit an alltime high of between 37,000 – 38,000. As the impact of the economic slow-down begins to filter, CBRE expects a lower volume in the coming year.

Mr Li said “Rents are likely to stabilize in Q4 as leasing activity eases. The sluggish economic growth projected for 2012 may translate to reduced job opportunities for expatriates. Coupled with a high number of new completions in 2011 and 2012, there will be some pressure on rents going forward".