Overall CBD Premium and Grade A Office Rents Crept Up by a Mere 0.3 Per Cent Quarter on Quarter to S$9.44 Per Sq Ft Per Month


According to international property consultancy, Colliers International, the office property market in Singapore continued to consolidate in 2Q 2015, amid looming supply in the pipeline and cautious occupiers’ sentiment. 


As of 2Q 2015, rents of overall Premium and Grade A office space in the CBD crept up by a mere 0.3 per cent quarter on quarter (QoQ) to S$9.44 per sq ft per month.  This reflects the lowest quarterly growth since 2Q 2013.  

Zooming into the Raffles Place/New Downtown micro-market, the average monthly gross rents for Premium Grade office space held stable for the third consecutive quarter at S$11.93 per sq ft in the second quarter, while rents for Grade A office space inched up 0.2 per cent QoQ to S$10.43 per sq ft – slower than the 1.6 per cent QoQ recorded in the preceding three-month period. 

Meanwhile, rents for Grade A office space in the other micro-markets in the CBD also recorded flat to marginal growth of 0-0.7 per cent in 2Q 2015. In line with the office leasing trend in the CBD, rental growth for Grade A office space outside the CBD also slowed to a two-year low and are almost flat in 2Q 2015. 

Occupancy Rate 

The moderation in rental growth from the beginning of the year was affected by sporadic leasing activities in the office space market. 

Grade A office space in the CBD bore the brunt of the office consolidation in 2Q 2015, with its overall occupancy rate inching down by 0.6 percentage points on a QoQ basis to 96.7 per cent. 

Mr Calvin Yeo (杨光伟), Deputy Managing Director of Colliers International, says, “Lease negotiations are now prolonged, as tenants negotiate harder for more competitive rents – on the back of the large pipeline supply of new and secondary office space  expected on-stream between 2016 and 2017.”  

He adds, “The continued wave of decentralisation also contributed to the dent in the overall occupancy rate of Grade A office space in the CBD.  The availability of new office buildings outside the CBD, such as Westgate Tower, which has comparable building specifications but more affordable than Grade A office space in the CBD, was a draw for tenants’ decentralisation move during the quarter.”

Recent examples of tenants who will be relocating from the CBD to Westgate Tower include Germany’s automotive firm, Daimler Group and mechanical engineering services firm, Beca. They follow suit after tenants, such as the Agri-Food and Veterinary Authority (AVA) and the Building and Construction Authority (BCA), moved from the MND Complex at Maxwell Road to Jem at Jurong Gateway Road. 

In the near future, the Ministry of National Development (MND) has plans to move from the MND Complex to JEM and the CPF Board will be moving from 79 Robinson Road to Novena Square along Thomson Road.

Cost-conscious companies that do not require a CBD front office are also making plans to move out of the area to reduce their occupancy costs, amid the uncertain economic environment. 

Consequently, the Grade A office space in the suburban micro-market saw its average occupancy rate post a 4.9-pecentage point QoQ spike to 96.4 per cent in 2Q 2015. 

Nonetheless, Premium Grade office space in the Raffles Place/New Downtown micro-market moved by a marginal 0.3 percentage points QoQ to 92.1 per cent during the quarter.  This was on the back of the ongoing flight to quality by tenants, especially by those looking to consolidate their operations onto the large and efficient floor plates offered by the Premium Grade offices. 

Capital Values

The office property sales market was on a decelerating mode in 2Q 2015. 

Investors’ wariness started to set in during the quarter – on the back of slowing rental growth, peaking prices, increasing interest rates and heated competition for buyers in the strata-titled office market due to the launch of several new strata-titled office projects.  

This is in addition to the impact from the introduction of the Total Debt Servicing Ratio, which continued to clip the appetites of individual buyers, as they find it difficult to secure big loan quantum for their property purchases.    

Nonetheless, the continued interest by institutional players, opportunistic private-equity investors, wealthy individuals and family offices in office investment properties provided some support to prices. 

As such, the average capital values of Premium Grade and Grade A office space in the Raffles Place/New Downtown micro-market stayed flat at S$2,821 per sq ft and S$2,532 per sq ft, respectively, in 2Q 2015. 


In view of the volatile economic environment and stepped-up office supply over the next two years, Singapore’s office property market is poised to maintain a flat outlook in 2H 2015; in particular, for the micro-markets within the CBD. 

The absence of new demand from banks remains the principal headwind for CBD office space demand. Additionally, the competitive rents of new business park developments outside the CBD could lure qualifying technology firms away from the CBD. 

Rents for Premium Grade office space in Raffles Place/New Downtown micro-market is expected to stay flat in 2H 2015.  Correspondingly, the rents for overall Grade A and Grade B office space in the CBD in 2H 2015 are expected to remain flat, after an increase of close to 1 per cent in the first 6 months of 2015.  

Ms Chia Siew Chuin (谢岫君), Director of Research and Advisory, says, “As pre-leasing activities of upcoming office developments that are slated to be completed in 2016 intensify, landlords – both new and old – are expected to increase incentives to compete and/or retain their tenants. This presents good opportunities for tenants to lock in leases at attractive terms.”  

With the quest for an improved workplace environment, potential office occupants are taking an interest in the upcoming integrated commercial developments – such as Guoco Tower at Peck Seah Street in the Shenton Way/Tanjong Pagar micro-market and DUO Tower along Rochor Road in the Beach Road micro-market – which are able to offer added convenience to tenants due to their ability to provide services from the adjoining hotel and/or retail podiums. 

On the sales front, transactional activity for 2H 2015 is expected to pick up slightly due to supply-led demand from the launches of new strata-titled office units. 

According to URA REALIS, about 52 caveats were lodged for strata-titled office units in the first 2 months of 2Q 2015, out of which 30 were for new units.  This is significantly more than the 2 caveats lodged for new strata-titled office units for the same period in 1Q 2015.  

For 2H 2015, strata office units at Anson House is expected to be launched and units at Prudential Tower are also reported to be in the process of being sub-divided for sale.  

Ms Chia concludes, “The expected increase in competition for buyers, coupled with limited prospects for rental appreciation, means that the overall capital values for Premium and Grade A office space in the Raffles Place/New Downtown micro-market should stay largely flat for the rest of 2015.”