International property consultant, Colliers International’s latest quarterly research report on the office property sector revealed that landlords with strong holding power and a long-term investment horizon were encouraged by the firming up of demand in the office sector, and revised upwards the rents of their office property portfolio in 3Q 2013.  

Consequently, rents of Grade A office space in all but two micro-markets registered quarter-on-quarter (QoQ) growth of between 0.3 per cent and 3.3 per cent during the quarter.  This contrasts from the situation in 2Q 2013, during which Premium Grade offices in the Raffles Place/New Downtown micro-market was the sole segment that experienced rental gains.  


Office rental recovery picked up pace in 3Q 2013. 

The average monthly gross rents of both Premium Grade and Grade A office space in the Central Business District (CBD) chalked up a stronger quarterly growth of 1.2 per cent to reach S$8.52 per sq ft in 3Q 2013.  This is compared to only 0.1 per cent growth recorded in 2Q 2013. 

Specifically, the QoQ growth in the average monthly gross rents of Premium Grade office space in the Raffles Place/New Downtown micro-market accelerated from 2 per cent in 2Q 2013 to 3.3 per cent in 3Q 2013, ending the quarter at S$9.92 per sq ft.  

Rents of Grade A office in the same micro-market also rebounded by 1.9 per cent to reach S$9.14 per sq ft. 

Mr Marcus Loo (劳耀萳), Executive Director of Office Services at Colliers International, says, “The office market in 3Q 2013 saw leasing activity dominated by lease renewals, with landlords pricing their buildings competitively to ensure continued high occupancies.  

Landlords are feeling confident and market sentiments should improve as we head towards the end of 2013, with a slight growth in rents as compared to the last quarter.”  

Mr Loo continues, “Notwithstanding, there is still a presence of pressure for companies to look at ways to cut cost.  And this has led to some firms reassessing the way they use their office space.  Buildings with large and efficient floor plate will continue to attract tenants and we should see more examples of flight to quality going into the next quarter.” 

Occupancy Rate 

Occupancy rates softened during the quarter, despite the healthy rental growth. 

The average occupancy rate of Premium and Grade A office space in the CBD eased 1.7 percentage point to 93.5 per cent in 3Q 2013, down from a 4½-year high of 95.2 per cent in 2Q 2013.   

The fall was led by a 6.5-percentage point drop in occupancy rate in the Premium Grade office space in the Raffles Place/New Downtown micro-market to 87 per cent in 3Q 2013.  Similarly, the average occupancy rate of Grade A office space in the City Fringe micro-market also fell 3.5 percentage point to a 4-year low of 95.6 per cent during the quarter.  

Mr Loo comments, “The fall in occupancy rates across several micro-markets was due to an influx of new office completions, rather than an overall contraction in demand; which also explains why rents were not adversely impacted.   

The quarter saw the completion of Asia Square Tower 2 in the Raffles Place/New Downtown micro-market which brought onto the market some 733,000 sq ft of space, as well as The Metropolis in the City Fringe micro-market which has some 1 million sq ft of space.”   

Capital Values

On the sales market front, strata sales activities moderated in 3Q 2013, as investors re-evaluated their purchase decisions or retreated to the sidelines due to the implementation of the total debt servicing ratio (TDSR) and the possible increase in interest rates. 

On the other hand, amid brighter economic and office rental growth prospects, the en bloc sales market continued to see healthy appetite from institutional funds that are not affected by the TDSR.   For instance, Perennial Real Estate Holdings was said to be in advanced stages of negotiation to purchase Tripleone Somerset in the Orchard Road micro-market at around S$980 million. 

Noticeably, property owners were not in a hurry to sell their properties due to their confidence in the long-term growth prospect of the office property market, as well as their strong holding power.  

Hence, notwithstanding the setback in strata sales activities during the quarter, the average capital value of Premium Grade and Grade A office space in the Raffles Place/New Downtown micro-market continued to stay flat at S$2,640 per sq ft and S$2,390 per sq ft, respectively, in 3Q 2013. 


Going forward, on the back of brighter global and domestic economic prospects, Singapore’s office leasing market is expected to continue to improve in the last quarter of 2013 –  supported by a broad base of demand drivers from commodity traders to law firms, to companies in the energy, finance and insurance, as well as information and communication sectors. 

Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory at Colliers International, says, “Office rents could continue to trend upwards in 4Q 2013 at a modest rate of about 1-3 per cent – given that businesses are still expected to keep a close watch on costs.  

This could bring the full-year rental growth for office space to between 1 per cent and 7 percent for the different micro-markets, reversing the 4.6-15.6-per-cent contraction in 2012.”    

For the sales market, although buying sentiments could continue to be dampened by credit restraints in the short term, demand could still be supported in the long term by an increasing number of companies who prefer to own their office premises to have better control of their long-term operational costs, as well as to enjoy potential capital appreciation of their properties.  

Recovery in office rents would also provide investors with better returns. 

Ms Chia concludes, “The average capital values of overall Premium and Grade A office space islandwide have increased by 2.2 per cent in the first nine months, and are expected to stay relatively stable for the rest of the year.  Hence, the full-year escalation which is projected at around 2.2 per cent will outpace the marginal climb of 1.2 per cent in 2012.