With reasonable office space supply in the pipeline, there is little risk of excessive rent increases in Singapore, said Moray Armstrong, Executive Director of Office Services at CB Richard Ellis (CBRE).
Last year was an extraordinary year for property developers, with new office space being pre-let at a growing pace. At the start of 2010, 40 percent of the 4.6 million sq ft of prime Central Business District (CBD) space due to be completed in a two-year period was pre-let. By the end of the year, 71 percent of space was let, translating to a further 1.4 million sq ft of new deals last year.
Thus, average monthly Grade A and prime rents surged at a rapid pace, gaining 22 percent and 23 percent year-on-year to close at S$9.90 psf and S$8.30 psf respectively.
Taking these facts into consideration, people in the industry might wonder if there is a need for cooling measures in the office market.
To determine if such measures are needed, CBRE applied its own stress tests against two benchmarks — the availability of enough quality office space for business, and the cost of office space at relatively competitive levels.
Mr. Armstrong said the Singapore office market is in a reasonable state of health. Office vacancy is currently fairly low at 4.7 percent and 2.7 percent in core CBD and Grade A aspects respectively, but far from the critical 2007 level, which stood at 2.7 percent and 0.2 percent in core CBD and Grade A aspects respectively.
There is also low probability ofextreme rent hikes, said Mr. Armstrong. Supply appears reasonable and occupier demand may moderate in the immediate term and full-year rent growth may ease back to about 12 to 15 percent, which is still decent by most markets’ standards, he added.
Source: Commercial Guru
