Rental Growth for the Entire Year Forecast to be Capped at 15 Per Cent 

International property consultant, Colliers International’s latest quarterly research report revealed that the office property market in Singapore started the year on a positive note – with healthy take-up seen for office space during the quarter. 

Office leasing activity was boosted by an improvement in global business sentiments, brought about by the faster-than-expected recovery in the United States and Eurozone economies.  This has spurred corporations in Singapore to gear up their operations to position for growth.  

Additionally, the quarter saw firms take a pro-active approach in reviewing expansion and relocation options, so as to lock in rents.  


As of March 2014, the average monthly gross rents for Premium and Grade A office space in the Central Business District (CBD) grew 3.2 per cent quarter-on-quarter (QoQ) to reach S$8.99 per sq ft.  This is the highest average monthly rental level achieved since 4Q 2011.  

Specifically, the average monthly gross rents for Premium Grade office space in the Raffles Place/New Downtown micro-market clocked its fourth consecutive quarter of growth, with an increase of 3.6 per cent QoQ to reach S$10.67 per sq ft in 1Q 2014. 

Meanwhile, the quarter saw Grade A office space in the same micro-market play catch up, by registering a 5 per cent QoQ growth to stand at S$9.73 per sq ft in 1Q 2014.  

The largest QoQ growth of 5.7 per cent in 1Q 2014 was witnessed in Grade A office space in the Suburban micro-market, but this was mainly due to the addition of Jem office tower to the basket of office properties tracked.  

Occupancy Rates 

Supported by healthy leasing interest, the overall average occupancy rate for Premium and Grade A office space in the CBD stood at 95.9 per cent in 1Q 2014, compared to 93.9 per cent in 4Q 2013.  

Specifically, the average occupancy rate of Premium Grade office space in the Raffles Place/New Downtown micro-market shot up by 6.3 percentage points QoQ to 93.8 per cent in 1Q 2014 – the highest occupancy level recorded since Colliers International started to track the series in 4Q 2011. 

Average occupancy rate of Grade A office space in the same micro-market also climbed by a marginal 0.8-percentage point to reach its three-year high of 96.9 per cent by March 2014.  

Mr Marcus Loo (劳耀萳), Executive Director of Office Services, says, “As the global markets improve with returning business confidence in recent years, we see companies positioning themselves to take advantage of the growth in Asia; which was already evidenced by the successful office take-up by Allianz and Mizuho, the largest CBD leasing transactions in 2012 and 2013, respectively. 

Leasing activities continued with momentum into 1Q 2014, with demand led by Premium and Grade A office space in the Raffles Place/New Downtown micro-market.  Companies look for modern and efficient floor space to house their operations, and we see the completion of several notable transactions in new buildings, such as Asia Square Tower 2.” 

Companies that took up space at Asia Square Tower 2 during the quarter included Westpac Banking Corporation, which is relocating from 77 Robinson Road; Mercuria Energy Trading, which is relocating from Republic Plaza 1; and Edrington, which is relocating from Asia Square Tower 1.

Capital Values 

In 1Q 2014, the average capital value of Premium Grade office space in the Raffles Place/New Downtown micro-market held firm at S$2,667 per sq ft, while that of Grade A office space inched up by a modest 0.2 per cent QoQ to S$2,400 per sq ft. 

Capital values during the quarter are, in part, supported by returning interest in the office investment market by investors and funds – on the back of improving office leasing demand and recovering rents. 

The first major office investment deal sealed in 2014 was the acquisition of the 99-year leasehold Westgate Tower, comprising strata office units from levels 6 to 25, by a consortium comprising Sun Venture Homes and Low Keng Huat (Singapore), for S$579.4 million (or S$1,900 per sq ft based on the net saleable area of 304,963 sq ft). 

Another office investment deal in the first quarter included the purchase of a 50-per-cent stake in Finexis Building at 108 Robinson Road by an offshore fund managed by Sin Capital Partners for some S$2,300 per sq ft, based on the building’s strata area of 58,830 sq ft.  

Over at the strata-titled office market, after a lack of new strata-titled office project launches for almost a year, a new 16-storey office and retail development in Jalan Besar, ARC 380, was launched in January 2014. All 52 strata-titled office units available for sale were reportedly sold within a week of its launch, at prices ranging from S$2,380 per sq ft to S$2,620 per sq ft.   

Mr Loo comments, “The encouraging sales response is an indication that demand for new strata-titled office units remained steadfast, despite the imposition of the Total Debt Servicing Ratio and an impending increase in interest rate.” 

However, the number of transactions in the strata-titled resale market remained low.  This could be attributed to the traditional festive lull period at the start of the year.  


With global economic conditions likely to continue to improve for the rest of 2014, and as Asia continues to offer greater growth opportunities compared to mature markets in Europe and North America, more foreign companies – such as those in the trading, brokerage and e-commerce industries – have recently opened or are looking to open new office in Singapore to ride on the global recovery wave.  

Mr Loo adds, “The first quarter of the year saw numerous Requests for Proposal (RFPs) by firms from the insurance, commodities, and information and communications-related industries, who were seeking to explore different leasing options ahead of their respective lease expiry.  These RFPs could potentially translate to more office leasing deals being inked in the next 6-12 months.”  

Ms Chia Siew Chuin (谢岫君), Director of Research & Advisory at Colliers International, says, “Underpinned by the expected healthy demand, it would be a landlord’s market in the Premium Grade and Grade A office segment for 2014 – given that many of these buildings are already enjoying relatively high occupancy levels of above 90 per cent.  

Moreover, the pipeline for new Premium Grade and Grade A office supply for the rest of 2014 and 2015 remains limited with only three major projects slated for completion – CapitaGreen, South Beach and Westgate Tower.” 

Consequently, rents are poised for a continued uptrend in 2014, but forecast to be capped at 15 per cent for Premium Grade and Grade A office space – taking into consideration risks that could de-stabilise the global economic recovery and the increasing cost of doing business locally. 

Meanwhile, with tenants carrying out their planned upgrades to newer buildings, there could be vacancy pressure for buildings of lower specifications.  Hence, the average rental growth for Grade B office space is expected to be limited to 10 per cent in 2014.  

On the sales front, office property owners are starting to factor in the future hike in rents into their selling prices; thereby, pushing up the overall price points for office space in Singapore. However, potential buyers’ ability to match sellers’ price expectations could be limited – due to the impending increase in interest rates and the continued tight regulations on banks’ lending policies. 

Consequently, office capital values are expected to remain relatively stable, with marginal upsides of up to 5 per cent in 2014.