Leasing momentum also sees slower growth since the start of 2011.
THE pace of office rental growth in the Raffles Place area has slowed in the first quarter of this year along with a slowdown in leasing activity.
Knight Frank estimates that the average gross monthly rental value for Grade A office space in Raffles Place rose 0.4 per cent for this quarter to $9.80 per square foot (psf) from the preceding quarter.
This was a much slower clip than the 11.9 per cent quarter-on-quarter rise seen in Q4 last year.
The property consultancy's head of consultancy and research Png Poh Soon forecasts the full-year increase could come in at about 10 per cent, about half the 20 per cent jump seen for the whole of last year.
Mr Png said Singapore's slower economic growth this year as well as inflationary concerns have resulted in increased tenant resistance to higher rents this quarter, leading to a slower growth in office leasing momentum since the start of the year.
This follows the strong net new office demand of 753,473 sq ft in Q4 last year, according to Urban Redevelopment Authority figures. That figure was the highest quarterly take-up since Q1 2007 and took net new demand for the whole of 2010 to 1.65 million sq ft.
DTZ's regional head, occupier services, Angela Tan said that her firm too has observed that the Raffles Place area posted the smallest increase in rentals this quarter compared with the rest of Singapore.
'A fair number of tenants have already relocated or will relocate soon to new developments like Marina Bay Financial Centre, OUE Bayfront and Ocean Financial Centre. The second-hand space released and to be released in the older buildings in the Raffles Place area is weighing down rents and hence the area has posted the slowest increase in rents this quarter,' she added.
CB Richard Ellis executive director (office services) Moray Armstrong said: 'The frenetic leasing activity last year has eased; it's more a case of business as usual now.'
He estimates the average monthly Grade A office rental value could end this quarter at about $10.20 psf, reflecting an increase of about 3 per cent from $9.90 psf in Q4 last year.
This is a smaller gain than the 10 per cent quarter-on-quarter rise for Q4 2010. He predicts a full-year 2011 increase of 10-15 per cent, following the 22.2 per cent jump in 2010.
Knight Frank's Mr Png said that overall, on a year-on-year basis, average office rents in the CBD are still up 31.5 per cent. However, suburban office rents have dipped 2.7 per cent year on year to $5.77 psf a month.
'Tenants may choose cheaper options such as office-like business spaces in high-tech factories or business parks. Invariably, the increased availability of such facilities attracts backroom qualifying office users seeking to operate at lower rental spaces and places downward pressure on existing suburban office rentals.'
Source: Business Times
