Prime office rents stabilise after falling 60% from peak

Office occupancy in Singapore rose by 0.8 percentage point quarter-on-quarter to 93.2% as a result of growth in demand.

Office rents have bottomed in Q2 2010 despite falling 50%-60% from the peak in Q3 2008. Prime offices in Raffles Place led the turnaround in rents with a 1.3% increase quarter-on-quarter (QOQ) to $7.90 per sq ft per month, a DTZ Debenham Tie Leung (SEA) Pte Ltd report on Tuesday said.

Meanwhile, average office rental values remained firm in other parts of the island in the quarter.

Ms Cheng Siow Ying, DTZ's Executive Director (Business Space) said, "Due to the strong economic recovery, a large number of new leases signed in the first half of the year involved companies taking up expansion space." Ying said DTZ sees broad based recovery in demand from all business sectors led by banks and financial institutions.

“We also witnessed an increasing number of new set-ups as companies take advantage of business opportunities in Asia where growth prospects are the strongest," added Ying.

Office buildings in the Central Business District are expected to lead the recovery in rents as occupiers take the opportunity to lock in attractive rents for prime office space.

Ms Chua Chor Hoon, Head of DTZ South-east Asia Research said, "A quick rebound in office rents is not expected as there will be ample supply of about 6.85 million sq ft between H2 2010 to 2012, notwithstanding that some 1.2 million sq ft or more of old buildings may be removed from the current stock for redevelopment. A stronger rate of increase in rents is likely to be seen in 2013 and 2014 as there will be significantly less new supply. The supply is unlikely to be topped up quickly as it usually takes about 4-5 years for sites on Government Land Sales programme to be sold and developed due to the large size of each development."