Singapore’s prime office rents are set to post their biggest increase in at least four years in 2014, and may extend gains this year in a supply-constrained market.
The office rent index for prime areas rose 8.7% in the first nine months of last year, heading for its largest gain since 2010, when it was up 12%, according to data from the Urban Redevelopment Authority.
A limited supply of new prime office space over the past two years, compared with demand from companies seeking central office locations, may push 2014’s rental increase as high as 14%, according to real estate broker Savills Plc. The same restricted supply will probably prevail this year and next, even if demand cools a little as the economy slows.
“Going into 2015, demand would almost match supply for prime office space, making the office market fundamentally sound,” said Alan Cheong, a Singapore-based director at Savills. He said landlords are in a strong position to resist demands for lower rents due to the limited amount of new space available this year and next.
About 1.15 million square feet of new office space will come on stream in 2015, compared with 1.87 million square feet in 2014, said Alice Tan, the director of consultancy and research at real estate brokers Knight Frank LLP. Marina Bay Financial Centre, which held its grand opening in May 2013, has about 3 million square feet of office space in three towers.