Rents of Premium, Grade A office space in the CBD up 2.9%

Leasing activity also picked up last year.

According to Colliers International Singapore, for the entire 2013, the average monthly gross rents for Premium and Grade A office space in the CBD grew 2.9 per cent, a welcoming turnaround from the 6.9 per cent contraction seen in 2012.

Leasing activity picked up in the second half of 2013. The firming of demand resulted in a tighter leasing environment, which in turn, enabled landlords to continue to revise their rental expectations upwards.

As of December 2013, the average monthly gross rents of Premium and Grade A office space in the CBD climbed 2.2 per cent quarter-on-quarter (QoQ) to reach S$8.72 per sq ft. This is the highest rental level seen in two years.

With most economic and market indicators looking positive, the near-term outlook for the office leasing market is bright. There is potential for rents to grow another 10-15 per cent in 2014.

The anticipated high investment cost could be balanced with possibly better returns due to lower vacancy rates and recovering rental levels. We expect office capital values to remain relatively stable in 2014, with marginal upsides of up to 5 per cent.