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10% upside seen for secondary office rentals

Q1 rental growth in Singapore's secondary office areas at the fringe and outskirts of the Central Business District (CBD) surpassed those in the Raffles Place area, according to a report released by DTZ Research.

According to the global research company, the average gross rents of offices in Raffles Place climbed 3.3 percent quarter-on-quarter to S$9.30 psf per month in the first quarter, compared to a 7.5 to 10 percent quarter-on-quarter increase in other areas.

Meanwhile, based on the analysis of rents for completed buildings, average rents in the Anson Road / Tanjong Pagar area surged 9.6 percent quarter-on-quarter to S$6.85 psf per month.

"The Anson Road / Tanjong Pagar area has been undergoing a makeover, with the addition of new and well specified good quality buildings like Mapletree Anson and Twenty Anson. GuocoLand's mixed use project at Tanjong Pagar will yield a million square feet of high quality office space, further augmenting the growing prominence of this business precinct," said Ms. Cheng Siow Ying, Executive Director for Business Space at DTZ.

The analysis also found that average rents in Anson Road / Tanjong Pagar are catching up with those in Shenton Way / Robinson Road / Cecil Street. The rental gap between the two areas has fallen to $0.25 psf per month in Q1, from S$2.80 psf per month at the latters' peak in Q3 2008.

Outside the CBD, average rents in areas such as Novena and Harbourfront have closed in on Shenton Way / Robinson Road / Cecil Street. Average rents in the Novena Belt rose 7.5 percent quarter-on-quarter to S$7.20 psf per month, while average rents at Harbourfront increased 7.7 percent quarter-on-quarter to S$7.00 per sq ft per month in the first quarter. This was similar to the average rents achieved in Shenton Way / Robinson Road / Cecil Street, which stood at S$7.10 psf per month.

"The new decentralised offices are built with high specifications to rival those in the CBD," said Ms. Chua Chor Hoon, Head of DTZ South East Asia Research.

"In particular, decentralised offices that are near to MRT stations and with a good spread of retail amenities around them see strong demand from occupiers who do not need to be located in the CBD. Hence, the traditional hierarchy of prime Raffles Place and secondary Shenton Way / Robinson Road / Cecil Street is evolving into a palette of more choices, with Marina Bay at the top end and many secondary ones inside and outside the CBD."

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