Chart of the Day: Only 1.3m sq ft of new office space supply will be completed until 2H16

Just right before the new wave.

According to Barclays, the performance of office market remained robust in 1Q14. According to CBRE, monthly rentals of Grade A/Grade B office space jumped by 5.1%/4.8% q/q to S$10.25/7.60 psf.

Lease enquiries have increased in Core CBD, given limited new supply until 2H16, and vacancy dropped to 4.3% in 1Q14 from 4.8% in 4Q13.

Here's more from Barclays:

Only two new office developments – CapitaGreen (700,000 sf) and South Beach (527,450 sf) – are scheduled to complete in CBD by 2H14, and the only major project in suburban micro-market – Westgate Tower (312,000sf) – will be completed in December 2014.

In 1Q14, leasing enquiries have picked up and optimism among landlords is high. Tenants are upgrading and expanding, and new tenants are opening offices.

Westpac banking Corporation is upgrading to Asia Square Tower 2 from 77 Robinson Road, taking up 38,000sf from the existing 15,000sf space. Mercuria Energy Trading is moving to Asia Square Tower 2 (c21,000sf) from Republic Plaza.

It was reported that CapitaCommercial Trust (CCT SP; OW; PT S$1.85) has signed its first tenant at CapitaGreen – Cargill – for close to 50,000sqft on slightly over two floors (c7% of total NLA, 700sqft) for over S$9psf/month.

We believe that while the S$9psf/month is lower than our assumed average $11psf/month, this is evidence of the positive leasing momentum in the prime office sector, and we expect incremental leases at higher rents before it completes the project in Dec this year.

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