4Q 2013 Recorded the Highest Average Monthly Gross Rents for Premium and Grade A Office Space in Two Years

International property consultant, Colliers International’s latest quarterly research report revealed that the office property market in Singapore ended 2013 on a firm footing – with occupancy rates, rents and capital values on an uptrend.  

On the back of improved economic conditions, as well as confidence in Asia’s growth prospects and Singapore’s position as a Global-Asia hub, the last quarter of the year witnessed a growing number of firms – including banks and companies in the financial services, insurance, as well as information and communication industries – expand their operations in Singapore.  Some of these companies required office premises with large floor plates and high-quality specifications, which helped seal a number of leasing deals at new buildings. 


As of December 2013, the average monthly gross rents of Premium and Grade A office space in the CBD climbed 2.2 per cent quarter-on-quarter (QoQ) to reach S$8.72 per sq ft.  This is the highest rental level seen in two years.   

Consequently, for the entire 2013, the average monthly gross rents for Premium and Grade A office space in the CBD grew 2.9 per cent, a welcoming turnaround from the 6.9 per cent contraction seen in 2012. 

Mr Marcus Loo (劳耀萳), Executive Director of Office Services, says, “Leasing activity picked up in the second half of 2013.  The firming of demand resulted in a tighter leasing environment, which in turn, enabled landlords to continue to revise their rental expectations upwards.  While most companies remain generally cautious on the outlook, there is an undertone of returned confidence amid strong occupancy levels across all micro-markets.” 

Specifically, in the Raffles Place/New Downtown micro-market, the average monthly gross rents of Premium Grade office space rose 3.8 per cent QoQ in 4Q 2013 to S$10.30 per sq ft.  This brought the full year’s increase in rents of Premium Grade office space to 8 per cent – the most significant year-on-year (YoY) increase among all micro-markets, as a result of robust demand driven by tenants’ flight to quality.

Occupancy Rates 

Underpinned by healthy demand for new office space in the Raffles Place/New Downtown micro-market, the average occupancy rates for Premium Grade office space in the locality nudged up from 87 per cent in 3Q 2013 to 87.5 per cent in 4Q 2013.  

Several leasing deals at new office buildings in the Raffles Place/New Downtown micro-market were sealed before the close of the year.  For instance, online service provider – Booking.com, was reported to have leased 45,000 sq ft of space in Marina Bay Financial Tower 3, while financial services firm – Citco, took up some 11,000 sq ft of space at Asia Square Tower 2, among others. 

Meanwhile, the average occupancy rate of Grade A office space across the different micro-markets held relatively firm in 4Q 2013, rising by up to 2.2 percentage points QoQ.  

Mr Loo comments, “While there is a continued strong demand for Premium Grade office space driven by tenants’ flight to quality, we also observed that secondary office space at older buildings enjoy good take-up rate. The absorption of such office space was driven by both existing tenants expanding their space requirements within the building and new tenants relocating to the locality.” 

For instance, it was reported that all of the final 143,000 sq ft of office space under Citibank’s lease at Millenia Tower in the Marina/City Hall micro-market has found replacement tenants – including Bank of New York Mellon which took an additional floor, and new tenants such as Barry Callebaut Cocoa Asia Pacific, PayPal and Dymon Asia Capital, among others. 

Overall, as of 4Q 2013, the average occupancy rate for Premium and Grade A office space in the CBD inched up by 0.4 percentage points to 93.9 per cent.  

Capital Values 

The upturn in office rents lifted the yields of office properties and, in turn, provided property owners with more bargaining power to negotiate for a higher selling price.  

The average capital value of Premium Grade and Grade A office space in the Raffles Place/New Downtown micro-market inched up by 1 per cent and 0.2 per cent in 4Q 2013 to reach S$2,667 per sq ft and S$2,395 per sq ft, respectively.  

This is the first time since 4Q 2011 that the average capital values of Premium Grade and Grade A office space in the micro-market have recorded positive growth.   

Sales activity for strata-titled office units softened in 4Q 2013, due to higher price expectations and the more stringent loan requirements arising from the Total Debt Servicing Ratio.  The last quarter of the year is also a traditional lull period for corporate transactional activities, as key decision makers go for vacations amid the festive season.  

Due to the lack of new launches of strata-titled office projects in 4Q 2013, the sales market was dominated by transactions of completed strata-titled office units in mature developments such as International Plaza and Springleaf Tower.   

Strategically-located completed strata-titled office developments also continued to attract the interest of corporate end-users looking to purchase their own office premises to avoid rising occupation cost. 


Notwithstanding the downside risks relating to concerns over the impact of the tapering of the US quantitative easing programme and the subsequent normalisation of interest rates, high unemployment in the Eurozone, as well as political instability in Thailand, the office property market is expected to grow from strength to strength in 2014. 

Demand for office space will be fueled by more business activities – on the back of the government’s push to establish Singapore as a global business hub, a wealth management and trading centre, a sustainable energy hub, a premier destination in Asia for legal services and dispute resolution, as well as a global insurance marketplace by 2020.  

Meanwhile, new office space supply is expected to stay at a high of 2.2 million sq ft in 2014.  Of these, 1.2 million sq ft will be available in the CBD, such as CapitaGreen and South Beach which are scheduled for completion in 4Q 2014.  The balance supply will be largely from projects that are either strata-titled (Paya Lebar Square and PS100) or located outside the CBD (Westgate), which should have minimal impact on rents in the CBD.    

As of December 2013, the stock of sub-lease space in the market has jumped to about 230,000 sq ft in 4Q 2013, from 140,000 sq ft in 3Q 2013.  

Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory at Colliers International, says, “The spike in sub-lease space is unlikely to be a major concern for the office leasing market.  This is because it arose largely as the result of space rationalisation from a myriad of industries, rather than the scaling down or cessation of businesses that are characteristics of a bear market.   Improvement in business sentiments should ensure a steady absorption rate.”

She continues, “Hence, with most economic and market indicators looking positive, the near-term outlook for the office leasing market is bright.  There is potential for rents to grow another 10-15 per cent in 2014.” 

In the sales market, investment is expected to become more challenging and costly due to tighter regulations and rising interest rates.  

Ms Chia concludes, “The anticipated high investment cost could be balanced with possibly better returns due to lower vacancy rates and recovering rental levels.  We expect office capital values to remain relatively stable in 2014, with marginal upsides of up to 5 per cent.”