Tight supply puts pressure on S’pore prime office rent
Rises for Q2 2006 at 13.5% q-o-q and 44.4% y-o-y, says JLL
TIGHT supply of prime office space in Singapore continues to push up rentals, with latest figures from Jones Lang LaSalle (JLL) showing an increase of 13.5 per cent quarter-on-quarter (q-o-q) in Q2 2006, and 44.4 per cent year-on-year (y-o-y).
A report by JLL also shows that capital values have increased by 10 per cent q-o-q and 23.5 per cent y-o-y.
Looking at prime office space in regional cities, JLL head of research (Asia Pacific), Jane Murray, said that the lack of supply ‘hampered’ leasing activity in most cities, with Singapore, Tokyo and to a lesser extent Shanghai seeing a majority of newly completed projects pre-committed.
Indeed, Singapore’s prime office space, which centres on Raffles Place and Shenton Way, registered the highest q-o-q rental increase in the region, followed by Hong Kong (Central) and Mumbai (CBD).
Dr Murray also said that ’some occupiers are willing to seek alternative accommodation outside the core districts given the surge in rents’.
In Singapore, she noted that rents in the secondary business districts (SBD) are also catching up with Raffles Place rents, with demand coming from banks and financial institutions that are undertaking expansion plans. But she added: ‘As these two markets are distinct in nature, we foresee no impact on one another.’
Vacancy rates have also contracted with latest q-o-q figures registering a further drop of 1.7 per cent. Dr Murray added: ‘Given One Raffles Quay is close to full occupancy, vacancy levels should continue to contract in line with the positive outlook of the economy and the growth of business and financial services.’
Investor interest remained centred on Japan, China, Korea and Singapore. ‘With rental growth still strong and the anticipated conclusion of the Federal Reserve’s tightening policy, we expect more investment activity in the months ahead,’ she added.
In Hong Kong (Central), JLL reported that the latest q-o-q increase of 8.9 per cent marks the 11th consecutive quarter of growth, the longest streak in 20 years. Interestingly, Dr Murray also noted that in the core markets of Delhi, Mumbai, Bangalore and Chennai, rents are reaching the levels of Singapore, ‘despite the lack of professional property management on the premises’.
The current Raffles Place rents command about US$431 psm per annum (on a net effective basis). In Delhi and Mumbai’s CBD, rents are US$491 and US$508 psm per annum, respectively.
Source : Business Times - 8 Aug 2006
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