But leasing enquiry levels and expansion requirements have not been quite as positive.
Grade A Core CBD office rents as tracked by CBRE Research jumped 4.1% in Q2 2018, the fastest pace of growth since Q1 2014. However, leasing enquiry levels and expansion requirements have not been quite as positive over the past couple of quarters as tenants grapple with a rising rental market environment.
Moray Armstrong, managing director, advisory & transaction services, CBRE Singapore noted that the fairly tight vacancy environment in the Grade A office market has encouraged office landlords to continue to press for higher rents as they seek to gain benefit from the market upswing.
“Key demand drivers have thus far been concentrated in flexible space operators and technology firms and to a lesser degree insurance companies,” Armstrong added.
The flexible space sector continues to be particularly active with a number of new locations announced by existing market players. IWG’s lifestyle co-working brand, Spaces, committed to lease over 35,000 sqft of space at TripleOne Somerset whilst JustCo’s newest location spanning 17,000 sqft will be in MacDonald House.
“Growth momentum from this sector has yet to show signs of slowing with a strong pipeline of new lease deals under negotiation,” Armstrong said. Homegrown insurance firms also expanded their operations, with Great Eastern and NTUC Income having leased space at the upcoming Paya Lebar Quarter (PLQ) development which has enjoyed strong take-up in the 1H 2018.
Armstrong commented, “The medium-term outlook for rents remains positive, aided by the tapering supply pipeline. Potential risks remain, particularly on the demand side, in light of recent escalations in trade disputes and the possible dampening effects on global economic growth.”
He added that both providers and end users of space will need careful navigation through the next six to 12 months as the actual strength of the market advancement is tested.
Meanwhile, the islandwide office vacancy rate hit 5.9% in Q2, unchanged from the previous quarter, in spite of the introduction of Frasers Tower’s 700,000 sqft into the office stock. Frasers Tower secured a healthy pre-commitment rate of almost 80% which includes tenants such as Total, Microsoft, ABN, and Sumitomo Corporation, CBRE added.
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