Commercial & Industrial Property News Update

Singapore - Office Market Still Strong: URA

November 1, 2012

The third quarter saw office property prices in Singapore increase by 1.9%, a sign that the sector is still resilient.

The latest official statistics from the Urban Redevelopment Authority (URA) indicates that Singapore's office property sector is staying strong. For Q3 2012, the price of office real estate across the island rose by 1.9%.

Knight Frank attributed the advance in the office price index to a strong resale market. Average prices for strata resale office units increased to SGD 1,831 psf, an 8.8% rise quarter-on-quarter.

However, Colliers International reckons that the office sector was buoyed by an increase in interest from investors turning away from residential properties due to a combination of soaring prices and the recent anti-speculation measures instilled by the government.

The URA Office Rental Index showed a marginal decrease of 0.1% in office rents for properties in the Central Area and Central Region. Meanwhile, Fringe Area rents remained flat in the third quarter.

This made for a marked improvement in the rental market as previously, office rentals have showed declines across consecutive quarters.

“This is largely due to a widened source of occupier demand vis-à-vis a 237,000 sq ft contraction in office stock during the quarter,” noted Colliers.

Q3 also saw office take-up reach a five-year high; a total of 764,000 sq ft was absorbed island-wide. This represents an increase of 115% from the previous quarter.

Knight Frank Singapore's senior manager for research, Alice Tan, said that the increase could be due to “tenants taking advantage of flat rents as landlords actively seek out prospective tenants while retaining existing tenants.”

The record take-up was also helped by a rise in the number of foreign companies moving their operations to Singapore to take advantage of Asia's growth momentum, noted Chia Siew Chuin, Director of Research & Advisory at Colliers. The firm noted that with Singapore's strong economic fundamentals, the island has bright prospects for remaining an internationally competitive business hub in Southeast Asia.

Moving forward, Knight Frank said that leasing activity in the fourth quarter will mirror that of the third quarter in light of the upcoming year-end festivities. Prices are likely to moderate as 2013 approaches, but interest in resale office units located in prime sites will be sustained, it added.

Tags: Commercial real estate, Office for rent, Office for sale, Business space

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