Prime office rents may test ’90s peak: UBS
PRIME office rents in Singapore are rising rapidly. Rents which at present work out at $5 per square foot (psf) per month could go up by as much as 60 per cent by the end of next year, says a new research report from UBS bank.
By 2010, office rents could even test the previous peak of $10 psf per month seen in the mid-1990s, the report says.
Charles Neo, the bank’s co-head of Asian real estate research, says: ‘The demand for office space is underpinned by limited supply and strong demand from the financial services sector.’
Mr Neo notes that offices are cheaper in Singapore than elsewhere in the region.
Rents here have been going down for 10 years, although there has been five years of growth in the financial services sector.
UBS sees rent levels for offices at Six Battery Road increasing from the present $5.10 psf per month to $6.70 psf per month by the second half of 2009, while rents at Capital Tower go up from $4.50 psf per month to $6.20.
The bank has a ‘buy’ rating on the owner of the two office buildings, CapitaCommercial Trust, which it sees as providing exposure to the cyclical upswing in rent levels.
Mr Neo likes real estate investment trusts (Reits) with exposure to the prime office and retail sectors in Singapore, arguing that ‘both retail and office sectors offer organic growth that could compensate rising inflation’.
UBS says that although there may be more ‘destination’ shopping malls over the next few years, this is likely to affect only poorly managed and over-rented malls.
Mr Neo expects ‘record visitor arrivals, sustained low unemployment and increased residential property prices over the coming years’ to help sustain economic momentum.
The market capitalisation of Singapore’s Reits has grown from US$1 billion to US$8 billion in the past two years and UBS sees this figure doubling in the next 12 months to US$16 billion.
In a separate announcement yesterday, UBS said Regina Lim has joined its real estate research team, reporting to Mr Neo.
Ms Lim joined UBS from the Urban Redevelopment Authority of Singapore where she led the commercial property research team responsible for analysing the Singapore office and retail markets.
Source : Business Times - 9 May 2006
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