The Singapore office market is showing signs of recovery post rental corrections that started in Q1 2012 as reflected in data for Q4 2013, revealed a CBRE report.
Over the last few quarters, decentralised market activity has been fairly strong as evidenced by the high pre-commitment levels attained by two new office developments added to the office stock in Q4 – Metropolis Tower 2 which was over 90 percent pre-let during opening and Jem which has been fully committed to the Ministry of National Development (MND).
The report also noted that “leasing activity in 2013 ended on a very positive footing with major lease commitments such as Mizuho Bank (110,000 sq ft) at Asia Square Tower 2 and Booking.com (45,000 sq ft) at MBFC Tower 3”.
As at Q4 2013, quarterly net absorption stood at around 1.27 million sq ft, taking the annual net absorption to 2.45 million sq ft or the highest level seen since 2011, and 58 percent higher than the 10 year average absorption level of 1.55 million sq ft.
Moreover, vacancy levels decreased across all geographic sub-markets, with island wide vacancy falling by 74 basis points (bps) to 4.4 percent or the lowest since Q2 2008, while vacancy levels in the CBD core sub-market dropped 167 bps to 4.8 percent.
This resulted in a 2.1 percent increase in the average rental values of both the Grade A and Grade B sub-markets, which reached S$9.75 psf per month and S$7.25 psf per month respectively as at Q4 2013.
Moving forward, CBRE expects the market availability situation to tighten further in the short to medium term before the next wave of office developments come on-stream from 2H2016, said Moray Armstrong, Executive Director, Office Services.
CapitaGreen is the only Grade A development that is set to complete between now and the second half of 2016.
The consultancy also expects rental growth to strengthen in 2014 and 2015, led by the Grade A segment of the market.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories email romesh@propertyguru.com.sg
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