SINGAPORE — Singapore’s prime office rents are set to post their biggest increase in at least four years in 2014, and may extend gains this year in a supply-constrained market.
The office rent index for prime areas rose 8.7 per cent in the first nine months of last year, heading for its largest gain since 2010, when it was up 12 per cent, according to data from the Urban Redevelopment Authority (URA).
A limited supply of new prime office space over the past two years, compared with demand from companies seeking central office locations, may push last year’s rental increase as high as 14 per cent, according to real estate broker Savills. The same restricted supply will probably prevail this year and next, even if demand cools a little as the economy slows.
“Going into 2015, demand would almost match supply for prime office space, making the office market fundamentally sound,” said Mr Alan Cheong, a Singapore-based director at Savills. He said landlords are in a strong position to resist demands for lower rents due to the limited amount of new space available this year and next.
About 1.15 million square feet of new office space will come on stream this year, compared with 1.87 million square feet last year, said Ms Alice Tan, the director of consultancy and research at real estate brokers Knight Frank. Marina Bay Financial Centre, which held its grand opening in May 2013, has about 3 million square feet of office space in three towers.
LONG LEASES
Some landlords are pushing tenants to accept unusually long leases amid concerns that the large amount of new office space due to be completed two years from now will cause the market to soften.
Marina One, a development taking shape on reclaimed land in the downtown Marina Bay area, will alone add 2.2 million square feet of office space in 2017, boosting supply in that year to about 4.7 million square feet, according to Knight Frank. The property is being developed by a joint venture of the state-owned Temasek Holdings and Malaysia’s Khazanah Nasional.
Instead of the traditional three-year lease for office space, landlords have responded to the extra supply in 2017 by asking for five- to six-year lease agreements to lock in today’s high prices, Ms Tan said. Tenants are asking for discounts in exchange for agreeing to the longer leases, she said.
The rental index for office space in the central region rose to 192.3 at the end of September last year, up from 176.90 at the end of 2013 and the highest since the quarter ended December 2008, URA data showed. The index for the fourth quarter will be released later this month.
Full article at http://www.todayonline.com/singapore/singapore-office-rent-set-post-biggest-gain-four-years
