Tuesday, March 20, 2012

Prime office rentals taking extended break

Business Times: Tue, Mar 20
(SINGAPORE) Office leasing deals since the start of this year have been relatively small, generally at 25,000 sq ft or below each - a far cry from the leases of more than 200,000 sq ft inked by financial institutions during the heyday in 2010.

'Demand for space from large occupiers, particularly in the banking and finance industry, has so far been muted in 2012,' says Jones Lang LaSalle national director of markets Andrew Tangye.

CBRE executive director (office services) Moray Armstrong says: 'The principal demand challenge the market faces at present is that the key banking sector has cooled off. There are only a few banks with firm requirements for new space and a higher number contemplating downsizing. This tenant sector occupies a very high proportion of Grade A space and its absence from leasing activity is a natural drag on the market.'

Property consultants say office rents have been under pressure in Q1. The near term outlook remains weak. For the rest of this year, vacancy levels will probably trend upwards and rents continue to ease on the back of weak demand and unabsorbed supply in new office project completions in 2011 and 2012, says Savills Singapore director of commercial Agnes Tay.

But most players do not envisage a dramatic rent correction as seen in 2009 following the global financial crisis. 'The downcycle could prove to be fairly short. Tenants can look forward to a conducive environment to negotiate attractive terms, but the best deals may well have already been secured before we enter 2013,' says Mr Armstrong...

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