Office rents in Central Business District expected to rise in 2018


RobinsonTower
Rental rates for Central Business District (CBD) offices are expected to rise next year, which may push companies to reconsider relocating to regional commercial hubs.

While office rents are expected to ride a growth curve towards the end of 2017, a sustained recovery is expected to occur only in 2018. That however gives companies the value of time to weigh in on the possibility of moving outside of the CBD and into growing regional hubs where they could save on housing and commercial space rental.

Take the upcoming Paya Lebar Quarter for example. Its 840,000 sq ft of office space across 3 towers will be ready for occupation next year and on the other side of the island, Woods Square in Woodlands will offer up 534,000 sq ft of office space by 2019. While this means the companies will have to be situated away from the buzz of the CBD, the decentralisation of office spaces is timely as the government moves towards a new era of self-sustaining regional townships.

WOods SquarePhoto credit: Far East Organization

The limited supply, of less than 1 million sq ft, of additional office space in the prime Central Business District from now to 2020 could mean a projected rental growth. Though Frasers Tower and Robinson Tower will add a combined 823,000 sq ft of new office space to the CBD next year, it is still a long way below the 2.15 million sq ft injected by the Marina One and 5 Shenton Way developments this year.

Office supply on the rise

As the supply of office spaces, especially in the Central Business District, increases, landlords are lowering office rents to entice new tenants. For the 3rd quarter in a row, CBD office rental prices have fallen.

Eon SHentonProperty analysts are expecting a rise in supply as companies move out of the prime central business district into cheaper regional business hubs and expansion plans for many foreign entities may have been put on hold due to the wavering global economy. Grade A offices were resilient despite the overall fall, perhaps due to the lack of supply of new units in the core areas. But moving outwards from the centre of the CBD, Grade B office spaces in Shenton Way, Robinson Road, Cecil Street, Anson road and Tanjong Pagar fell 4 per cent.

Co-working spaces have gained popularity of late, and demand for these sort of short-term leasing or shared-leasing arrangements may be on the rise. Most of these tenants are start-up firms in the technology and social media fields who need spaces close to their clients and conveniently located to attract and retain talents.

In addition to the off-kilter scale of supply and demand, some tenants may also be looking at subletting existing spaces which they have leased but are not occupying, thus increasing the actual amount of office space available in the market.