Rentals for Grade A office space in the financial district may see at least a 25 percent increase in the next two years.
Many analysts stressed that Grade A office rents in the country have already hit bottom, but will likely recover starting from the second half of the year.
Among the prime regions in Singapore that offer a new generation of office space is the Marina Bay Financial Centre, which houses buildings that are less than 10 years old and are categorized as “International Grade A“ office space.
These newer buildings are usually in high demand from companies such as law firms and financial institutions, which intend to consolidate and expand their offices in a single location, said analysts.
This trend also gives leasing a boost.
”Because the economic condition is better than expected, as compared to the same time last year, tenants are more confident in expanding, and landlords are becoming more confident holding their rents,” said Donald Han, MD of Cushman & Wakefield, which predicts a five to ten percent increase in prime Grade A office rentals in the second half of 2010.
However, analysts said that the rents for Grade A or Grade B office space may remain soft or even drop, as well as those that are over 10 years old.
OCBC Investment Research believes that an oversupply in non-Grade A office property space in the country can still occur.
Based on official figures, about 8.3 million sq ft of office space is scheduled for completion from 2010 to 2012. This may result in an 11-percent increase in available office space in two years.
Meanwhile, Nomura said the pre-commitment agreements for international Grade A office space have surged over the previous six months, as firms seek to house their business operations under one building.
”We think that office rents will start to pick up quite significantly over the course of 2009 to 2012. We are looking for rental levels to pick up around 28 percent for international Grade A office space, and about 16 percent for the normalized Grade A space,” said Tony Darwell, executive director of Nomura Singapore.