Chart of the Day: Rates of Grade A office rent fall
The average monthly rent of CBD Grade A offices was S$8.47 per sq ft in the second quarter of 2012.
Savills Research reported:
The average monthly rent of CBD Grade A offices was S$8.47 per sq ft in Q2/2012, slipping 1.3% quarter-on-quarter (QoQ). This is the fourth successive quarter which has seen rental levels falling from the peak of Q2/2011. However, the rate of decline was slower in Q2/2012 compared with the previous two quarters, indicating a stalemate in the market as both landlords and tenants look for direction amid uncertainties in the global and local economies.
Increasing vacancy rates in the Raffles Place/Marina Bay and Shenton Way areas placed pressure on their achievable rents. Rents in these two sub-markets experienced the greatest corrections of 2.7% and 1.7% QoQ. On the other hand, due to the higher occupancy, rents in the Orchard Road micro-market rose 2.3% QoQ after three consecutive quarters of negative growth and have even surpassed Raffles Place rents. Meanwhile, rental levels in other areas, such as City Hall, Tanjong Pagar and Beach Road, remained stable in the reviewed quarter.
In Q2/2012, investment activity in the office segment picked-up with five block transactions worth a total of S$1.16 billion. In the CBD, Tower 15 on Hoe Chiang Road changed hands for S$360 million or S$1,895 per sq ft based on net lettable area (NLA) in May. More recently, K-Reit bought another 12.39% interest in Ocean Financial Centre for S$285.7 million or about S$2,600 per sq ft based on NLA. The average capital values of Grade A offices tracked by Savills remained unchanged at S$2,445 per sq ft in Q2/2012.
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