Office rental growth gathers speed in Q4

Office rental growth gathers speed in Q4

Published December 30, 2010

THE pace of office rental growth gained momentum in the fourth quarter of 2010, according to a new report from DTZ.

The firm said that average prime gross rents in Raffles Place rose 7.1 per cent quarter-on-quarter in Q4 2010 to $9 per square foot per month. This reflects an increasing rate of rental growth from Q3 2010 when rental values rose 6.3 per cent.

For the whole of 2010, average prime gross rents in Raffles Place increased by 13.9 per cent, DTZ said.

The net absorption of office space for the whole of 2010 is estimated to be about 4.4 million sq ft, although this includes about 1.7 million sq ft of space that was pre-committed.

Excluding the pre-committed space, which is being fitted out, the net absorption will be 2.7 million sq ft and the occupancy rate will be 92.7 per cent, DTZ said.

'Despite earlier concerns about the hollowing out effect when occupiers upgrade to new buildings, we notice that the vacated space is being taken up readily by existing tenants wanting to expand, or occupiers from other buildings,' said Angela Tan, DTZ's executive director for occupational and development markets.

But downward pressure on the occupancy rates of older secondary buildings can be expected, as tenants move to the better-quality buildings that are being vacated, she added.

An estimated 8.2 million sq ft of net lettable space could be available between 2011 and 2015, DTZ said. This includes government land sales sites that have been awarded to developers but have not received planning approval.

The bulk of the new supply, about three million sq ft, will be completed next year. New CBD office completions in 2011 include Asia Square Tower 1, Ocean Financial Centre, OUE Bayfront and One Raffles Place Tower 2.

DTZ expects rents to move up at a slower rate next year until there are clearer signs of a recovery in the US and Europe.

There is still holding back on widespread expansion, particularly among occupiers whose headquarters are based in these major economic regions, the firm noted.


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