Prime office rents in prestigious Raffles Place rose again last month and are now almost double what they were just 12 months ago.

Prime office rents in prestigious Raffles Place rose again last month and are now almost double what they were just 12 months ago.

That is according to the latest figures from property consultancy Cushman & Wakefield, which says that average rents in Raffles Place are now at a record $11.92 per sq ft (psf), as the current supply squeeze takes a continuing toll.

Property consultants say some prime office tenants whose leases expire this year face a trebling of their rents.

These escalating rents are forcing some tenants to pull out of some of the best corporate addresses in town - to seek office space elsewhere.

But there are plenty of takers even at the high rents.

Cushman & Wakefield managing director Donald Han said: ‘Many buildings in Raffles Place are enjoying full occupancy…and may not have space until next year.’

At the top end of the market, deals for premium Grade A space in buildings such as Republic Plaza Tower 1, UOB Plaza, Singapore Land Tower and 6 Battery Road have already been done at record highs of $15 psf to $16 psf.

Singapore is suffering a severe supply crunch in the office sector that is likely to ease only in 2010, when more space will be ready.

About 330,000 sq m of gross floor area of new office space is set to be completed between now and 2009. But it will not be enough, property consultants say.

Demand remains strong as businesses expand, while supply is still falling as ageing office buildings such as One Shenton Way are torn down.

Prime office rents in the rest of the so-called Golden Shoe area, including Anson Road, Cecil Street, Robinson Road and Tanjong Pagar, have climbed to $8.91 psf, up 83 per cent from a year ago, Cushman & Wakefield said.

Elsewhere, rents in the City Hall, Marina Centre and Bugis areas have risen to $11.04 psf on average, or 82 per cent up from a year ago, it said. Centennial Tower and Millenia Singapore, for instance, are almost full.

Office rents in the Orchard Road area have also climbed, though not as sharply as the traditional business areas, and are now about 36 per cent higher than a year ago, it said.

‘We’re seeing more tenants take up space in various locations because they can’t find space to expand in the same building,’ said Knight Frank’s director of business space, Ms Agnes Tay.

Tenants in prime office space are paying a lot more for the same area. ‘In the past, for every three-year renewal, tenants were looking at a rise of 30 to 50 per cent,’ said Mr Han.

But tenants whose leases expired last year were met with a rude shock - they had to pay double the rent to renew their leases, he said.

Worse still for those that are renewing their leases this year - their rent could treble, he added.

Some tenants have bought their own space to avoid paying these astronomical rents.

Property consultants say some firms have moved out to non-conventional office space such as shophouses and business parks. This trend should continue, they add.

Some tenants have already pulled out of Raffles Place, while others are weighing their options, they say.

They face a tough choice as some businesses thrive on the prestige of the Raffles Place location, they add.

Even if they do move out, others ahead of them may have already contributed to the rise in rents of alternative space. Office rents in high-tech business parks are revisiting the record highs of the 1996 peak, said Mr Han.

They are now ranging from $3.20 psf to $3.50 psf, up from about $2.50 psf a year ago, he said.

Meanwhile, the Government has said it will make available land for transitional offices to help ease the tight supply.

Source: The Straits Times, 21 June 2007