Grade A office rents up 11.2% over last 3 months:Colliers

Year growth is expected to come up to about 25%, reaching $2,500- 2,700psf by end 2011.

According to DBS, Average Grade A capital value has risen 33.5% yoy to $2,322 psf in 1Q11. Thanks to demand from a new wave of international capital focusing on Singapore and a lack of Grade A office investment properties. This level is a shade off the previous peak of $2,814 psf in 2008 (1Q- 3Q08). Separately, prime A Grade office rent has risen 8% qoq to $9.72psf and full year growth is expected to reach 15-20%.

Capital values moving faster this year. They noticed that most of the recent transactions were done at average passing yields of sub of 3.5% as buyers priced in rental growth upon lease expiry in the rising market. This will continue to underpin underlying values. The capital value projection stated by property consultants is in line with their expectations and they have already imputed values of $2,600psf for Kepland's OFC and MBFC2 in our RNAV estimates. This is still below the peak price of $3,125psf paid for 71 Robinson Road in April 2008.

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