83% of new office space supply projected to be completed in 2H13

But outlook remains gloomy.

According to DBS, the nascent signs of strength in the office leasing market as a temporary mismatch between demand and supply.

Net positive take up of 0.2msf in 1H13 coupled with c0.16msf of older office space taken out of circulation squeezed occupancy a tad higher to 91.2% and lifted rents by 0.2% in 1H.

Here's more from DBS:

Going forward, with 83% of 2013’s new supply being completed in 2H, tenant relocations and re-leasing activities and frictional vacancies would mean a lacklustre outlook.

We expect office rents to end the year relatively unchanged at 0% to -5% (vs -5% to -8% previously) and occupancy to hover around the 89-90% mark.

Our strategywould be to prefer landlords with exposure to the CBD or the Central areas given that a large part of the fringe office and business parks space has been absorbed. Demand likely to remain bite-sized and capital values stable as low short term interest rates would give property owners holding power.
 

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