Office property market cooling slightly in Q2
Singapore’s office property sector market appears to be cooling a little.
According to property consultant DTZ, the average office occupancy rate for the second quarter of this year saw a dip of 0.2 percentage point to 96.9 per cent.
Office rental prices have also been flat - suggesting that the market is resistant to rising prices.
DTZ said the slight dip in occupancy rate was due to tenants seeking cheaper locations when their leases expired.
Chua Chor Hoon, Senior Director, Research, DTZ, said: “… it has eased very slightly, by 0.2 percentage point, which reflects the office occupier’s resistance to the high rentals in the CBD (Central Business District), and also partly (because) of the slower economy.
“Companies are now more cautious and they are taking a longer time to think about expansion and renewal.”
Despite the overall decline, areas just outside the CDB saw higher occupancy rates - with the Novena and HarbourFront areas hitting 99 per cent.
At the same time, office rentals climbed by 1.1 per cent, with locations like Raffles Place now going for an average of S$19 per square foot a month.
The report showed that businesses have been looking at alternative locations like business parks, and temporary office locations to tide them over until new office locations open up in 2010.
At the moment, business park rentals cost about half, or a third, of office rentals in the CBD.
Some companies may find it more cost-effective to stay in these alternative locations, but DTZ believes there will still be demand when the new supply comes on-stream.
Ms Chua said: “There will be new demand to take on the new office space, and even if the economy slows down this year and next year, we are likely to see it coming back in 2010.
“That’s when it also coincides with a few major events and developments that are going to take place, like the integrated resorts, and the Youth Olympics, and that is going to give the economy a boost.”
The DTZ report also showed that industrial sector demand remained stable - despite a weakening manufacturing sector - due to foreign investment. - CNA/ms
Source : Channel NewsAsia - 30 Jun 2008
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