Lack of new office space pushes rents up

Lack of new office space pushes rents up

Demolitions for redevelopment to exceed scheduled supply in 2007: DTZ

By ARTHUR SIM
Email this article
Print article
Feedback

THE shortage of new office space is exerting increased pressure on rents, resulting in their rising by almost 30 per cent in some areas.

New benchmarks were also achieved in the Marina Centre, Orchard Road, River Valley/Singapore River, Novena and HarbourFront areas.

An analysis of market data in DTZ Debenham Tie Leung's quarterly property market report for Q1 2007 revealed that office space slated to be demolished for redevelopment will exceed the supply scheduled for completion in 2007.

In addition, average annual new supply in the next four years - 928,700 square feet - will fall short of the 1.7 million sq ft average annual take-up seen in the last 10 years.

DTZ noted that financial and business services sectors have continued to expand here.

DTZ executive director and regional head of consulting and research Ong Choon Fah added: 'The clustering of global businesses has resulted in across-the-board multiplier effects, for example, increased demand for supporting businesses.'

This has led to an increase in rents.

In Raffles Place, prime rents escalated by 28 per cent in Q1 2007 to average $10.90 per square foot (psf), higher than the previous peak of $10.50 psf in 1996.



The highest quarter-on-quarter increase of 29 per cent was achieved in the Marina Centre area, which has reached a historic high of $10.30 psf.

DTZ's report revealed that in microzones like Orchard Road and HarbourFront, rents similarly registered highs of $8 and $6.30 psf respectively.

DTZ also noted that higher rents caused some occupiers to relocate from the CBD to most cost-effective premises.

It also believes that more tenants will review workplace strategies or pre-commit earlier in future developments where possible, as rents are expected to top the highest peak in 1990 with prime rents in Raffles Place only 3 per cent shy of the $11.25 psf achieved 17 years ago.

Occupancies have also risen. DTZ highlighted increased occupancies at Samsung Hub in Raffles Place and at PSA Building in the Alexandra microzone in particular, where occupancies rose by 18 percentage points each to 98 per cent and 85 per cent.