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Limited upside to Singapore office rents expected: Chestertons

Singapore's office market is recovering but central business district rents are unlikely to rise dramatically as much of the new demand is from tenants who are more price-sensitive, real estate services firm Chestertons said on Tuesday (July 8).

SINGAPORE: Singapore's office market is recovering but central business district rents are unlikely to rise dramatically as much of the new demand is from tenants who are more price-sensitive, real estate services firm Chestertons said on Tuesday (July 8).

According to Chestertons, firms in sectors such as energy, commodities and technology do not necessarily require prime CBD locations and will be among the first to move out when rents spike.

"Companies which have relocated out of the CBD in times of escalating rents included ExxonMobil from OUB Centre, Shell from Singapore Land Tower and recently Cisco Systems from Capital Towers," it said.

OUB Centre is the old name for One Raffles Place, which is one of Singapore's tallest office buildings.

"We expect CBD office rental increase to be checked by resistance from cost-conscious tenants, lack of expansion plans by traditional major CBD office occupiers like the banks and financial institutions, and prevailing high vacancies in upcoming new completions," Chestertons said.

It added that potential rental spikes will likely be confined to upcoming suburban areas such as Jurong West, due to the completion of new Grade A offices such as the Metropolis, Jem and the soon-to-be completed Westgate Tower.

Chestertons estimates that Grade A office rents in the CBD grew by 0.5 per cent quarter-on-quarter to average S$9.64 per square foot per month in the April-June period.

In contrast, suburban Grade A office rents grew by 4.9 per cent to average S$5.70 psf per month.

Rents in Singapore's CBD have risen over the past year, thanks to the influx of energy and commodity firms as well as the expansion of premises by social media giants such as Google and Facebook.

"In spite of the stronger-than-expected office rental recovery in the past 12 months, the fundamentals guarding the office market today differs from that in 2010/2011 or even prior to the global financial crisis," Chestertons said. 

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