Business

Office prices and rents suggest turnaround

The office market showed signs of a turnaround in the third quarter, although vacancies rose to their highest in 12 years.

Prices rose 0.4 per cent in the three months to Sept 30 compared with the second quarter. This followed a 1.4 per cent fall in the second quarter.

Rents rose as well, up 2.4 per cent in the quarter for the first time in 10 quarters, after a decline of 1.1 per cent in the previous three months, according to Urban Redevelopment Authority data on Friday.

"This is an indication that prior fears around a supply overhang have diminished as leasing commitments to new developments continues to gather steam," said head of research for Singapore and South-east Asia at property consultancy CBRE, Mr Desmond Sim.

Cushman & Wakefield research director Christine Li said the big surprise is office rents turning around sooner than expected.

"With strong third-quarter gross domestic product numbers confirming an earnings recovery story this year, market confidence has returned...

"While demand has been soft, primarily among banks and financial services companies, the slack has been picked up by sectors like shipping, energy, legal and technology."

Dr Lee Nai Jia, head of research at Edmund Tie & Company, noted that the improvement in rents reinforced confidence in office building investments, signalled by the acquisition of Asia Square Tower 2 and the awarding of the Beach Road site.

En bloc activity has also spilled over to commercial and mixed-use buildings.

Despite vacancies jumping 13.3 per cent from 12.4 per cent in the second quarter because of the completion of the Marina One development, there are signs the market has reached a turning point.

Leasing momentum in new projects remained steady in the third quarter. - THE STRAITS TIMES

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