Business

CBD rental rebound may prompt firms to find cheaper areas

The anticipated recovery in prime office rents in the Central Business District (CBD) next year may prompt some firms to consider relocating to cheaper areas, said consultancy Cushman & Wakefield.

It expects the gap in rents between Grade A offices in the CBD and suburban space to widen to 85 per cent next year and 94 per cent in 2019, up from 75 per cent in the first quarter of this year.

Research director Christine Li noted yesterday that rents for prime CBD offices will be close to bottoming out by year end.

"Once (these) rents return to growth in 2018, we could see decentralisation activities picking up pace."

She noted that monthly rents for Grade A space in the CBD have been sliding since a peak in the first quarter of 2015, when they were more than $10 per sq ft (psf).

They continued to decline in the first quarter of this year, falling nearly 1.9 per cent from the fourth quarter of last year to $8.47 psf per month.

Monthly suburban office rents declined by about 1 per cent over the same period to $4.84 psf in Q1this year.

Cushman & Wakefield expects prime office monthly rents in the CBD to ease further this year, before rising to a forecast rate of $8.86 psf at the end of next year and $9.60 psf in 2019.

The projected rental growth is largely due to the limited supply of new office buildings in the CBD from next year to 2020, with less than one million sq ft of additional space coming on in each of those years, it said.

Frasers Tower and Robinson Tower - both in Shenton Way - are expected to be ready next year, adding a combined 823,000 sq ft to the CBD.

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