Office leasing activity subdued but sales robust

Leasing activity weakened in the office market over the first three months of the year but there was still plenty of sales action.

Leasing demand was dampened by lingering debt woes in the euro zone and slowing growth in China and Japan. These issues have resulted in corporate restructuring and a hiring freeze in some firms while keeping many others - especially the large occupiers in the banking and finance industry - on the sidelines in the first quarter.

The weakening outlook was also mirrored in rents, with levels falling in all micro-markets in the first three months compared with the quarter before.

The steepest drop of 8.8 per cent was lodged in the Grade B segment of Beach Road, while Grade A office space in the Marina and City Hall area registered the smallest dip of 2.3 per cent.

Average monthly gross rents for Grade A space in the Raffles Place and New Downtown market fell 5.3 per cent, following a 4.3 per cent correction in the fourth quarter of last year. This has brought average monthly gross rents for the area to $9.76 per sq ft (psf).

It was a different story for the office sales market, which was thriving in the first quarter with new launches enjoying quick take-up rates.

For instance, all 100 strata-titled office units at PS100 in Peck Seah Street were snapped up at an average price of $3,000 psf during its launch last month.

Beyond the low interest rates and high inflation that kept investors active in the office sales market, the introduction of the extra buyer's stamp duty also increased interest in alternative asset options such as strata-titled office units.

Source: The Straits Times – 12 April 2012