Grade A office rents may plummet 18-22% in 2012

Rents are expected to drop to S$8.50-9psf, as the country’s employment and GDP growth is on the decline.

CIMB says there will be lower pipeline supply levels in the next 6-12 months, with a large portion of the CBD stock already pre-committed.

Here’s more from CIMB:

Office: lower rents, lower pipeline supply
Office rents have recovered from the lows of 2009, but are still some 35-40% below previous peak levels. On a though-the-cycle basis, Grade A rents of S$10-11psf are probably at historical average levels. Discounts to Hong Kong rents have also remained wide since 2009. In addition, we believe one key difference between now and then is the lower pipeline supply levels, with a large portion of the CBD stock coming in the next 6-12 months already pre-committed. Supply completions are expected to be uneven as more supply will come through in 2014-2015 vs. 2012-2013. Similar to past cycles, we believe the demand disparity between new and old will widen, with newer buildings commanding higher spot rates vs. older buildings.

We lower our office assumptions once more, following our downgrade in Aug. Declining jobs and GDP growth have historically led to weaknesses in office rents through the cycle, and we expect this to trend to hold going into 2012. Retrenchments in the financial sector are gaining pace, something that will adversely affect office take-up. We now expect Grade A rents to retrace 18-22% from current levels, from 5-10% previously, down to S$8.50-9psf.

Our base case though remains that the bottom of 2009, when Grade A office space traded at S$6.50-7.50psf, will not be retested unless net employment falls below 2009 levels. A lower supply pipeline in this cycle helps mitigate a drastic fall in occupancy. We raise our cap rates by another 50ps to 5.25%-5.5%, a shade below the worst of the GFC, and implying Grade A capital values of S$1,750-1,900psf.

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia