Chart of the Day: This graph shows the big gap between office demand and supply

Will rents continue to rocket?

According to Savills, although the pace of growth slowed slightly coming into the fourth quarter, Singapore’s economy registered a 3.7% YoY increase in 2013, near the top end of the official forecast of between 3.5% and 4.0%. 

2013 was a year of recovery for the Singapore office leasing market, with a broad-based improvement in demand across all sectors. Real economy sectors, such as resources, oil and gas, and professional services companies, continued to account for the largest share of office take-up.

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Encouragingly, we have also seen increased demand from banks and financial institutions, although they have not yet fully nursed themselves back to health post-global financial crisis. Within this context, demand for smaller spaces (less than 10,000 sq ft) from real economy companies continued to dominate the market.

By location, leasing activity has continued to focus on the CBD, although some tenants opted for suburban locations, such as one-north, attracted by lower rents.

Taking advantage of limited new supply and increasing demand for smaller spaces, landlords, particularly those of prime-quality office space, have held out for higher rents. However, given the continuing lacklustre performance of the financial sector, landlords have encountered resistance from these traditional large space occupiers.

Therefore, rents are rising on the back of smaller-sized lettings, while rents of large floorplate spaces are still under pressure.