CBD Grade A office supply to massively drop to just 506,900 sq ft in 2015

[yanziyang]

Rents likely to be pushed up.

According to Savills, the Monetary Authority of Singapore’s latest quarterly survey revealed that economists from the private sector are still positive about the Singapore economy and expect a 2.8% growth for the whole of 2013.

This is near the top end of the government’s forecast of 1% to 3%. However, a fl are-up in Europe’s debt crisis and the impact of the US government’s fiscal deals remain the biggest downside risks.

Here's more from Savills:

For the foreseeable future, it is likely that office demand will continue to come from real economy companies like oil and gas, chemicals, and IT companies.

On the other hand, for the rest of 2013, the low interest rate environment and the lack of new prime CBD supply could embolden landlords of CBD Grade A buildings to push up rents, despite knowing full well that the underlying and future market fundamentals may remain soft.

This situation may continue over the next few years as Grade A supply in the CBD is limited, with 700,000 sq ft in the second half of this year, 692,000 sq ft in 2014 and 506,900 sq ft in 2015.

Therefore, when the substantial supply comes on stream beyond 2015, the landlords would have already set a much higher base from which to discount instead of doing so from a low base.

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IMHO Suntec REIT, Keppel REIT, Ho Bee etc will benefit.

[MINX]

Rents likely to be pushed up.

According to Savills, the Monetary Authority of Singapore’s latest quarterly survey revealed that economists from the private sector are still positive about the Singapore economy and expect a 2.8% growth for the whole of 2013.

This is near the top end of the government’s forecast of 1% to 3%. However, a fl are-up in Europe’s debt crisis and the impact of the US government’s fiscal deals remain the biggest downside risks.

Here's more from Savills:

For the foreseeable future, it is likely that office demand will continue to come from real economy companies like oil and gas, chemicals, and IT companies.

On the other hand, for the rest of 2013, the low interest rate environment and the lack of new prime CBD supply could embolden landlords of CBD Grade A buildings to push up rents, despite knowing full well that the underlying and future market fundamentals may remain soft.

This situation may continue over the next few years as Grade A supply in the CBD is limited, with 700,000 sq ft in the second half of this year, 692,000 sq ft in 2014 and 506,900 sq ft in 2015.

Therefore, when the substantial supply comes on stream beyond 2015, the landlords would have already set a much higher base from which to discount instead of doing so from a low base.

------------------
IMHO Suntec REIT, Keppel REIT, Ho Bee etc will benefit.

I don't think it will be a sure thing. Not all companies need to be in the CBD, some could opt to operate from non-CBD office or even business parks.

[yanziyang]

Grade A office space take up shockingly jumps 511% to 489,000 sq ft, Versus last quarter's 80,000 sq ft.

According to Savills data, about 489,000 sq ft of CBD Grade A office space was taken up in Q1/2013, in contrast to the 80,000 sq ft in the previous quarter.

This, together with no new supply during the same period, caused vacancy rates in most micro-markets to fall for the second successive quarter.

Here's more from Savills:

The declines ranged from 0.5 to 3.9 percentage points (ppts). By the end of March, the overall vacancy rate of CBD Grade A office space stood at 5.9%, 1.9 ppts down from 7.8% at the end of 2012.

Due to the quick absorption of remaining vacant space in Asia Square Tower 1 and MBFC Tower 3 in the reviewed quarter, occupancy rates of prime (AAA grade) office buildings in the Marina Bay precinct (95.0%) have surpassed those of other Grade A offices (93.8%) in our basket for the first time since Q3/2011.

[yanziyang]

CBD Grade A office rents edged up 1.2% to $8.41psf. AAA grade office rents jumped the highest.

According to Savills, a turnaround in average rents of CBD Grade A offices was witnessed in Q1/2013 after falling for six consecutive quarters since Q3/2011.

Rents of such buildings tracked by Savills edged up 1.2% QoQ from S$8.31 per sq ft in Q4/2012 to S$8.41 per sq ft in Q1/2013. AAA grade office rents recorded the biggest quarterly growth of 2.9%, averaging around S$10.29 per sq ft in Q1/2013.

Here's more from Savills:

Although whole-floor rents have remained unchanged from a quarter ago, the healthy demand for pocket space has pushed up rates.

In contrast, the rental growth of other CBD Grade A offices was marginal at 0.5% QoQ. By location, rents were unchanged in the Beach Road/Middle Road and City Hall submarkets, while those in other areas rose slightly from a quarter ago, with the Shenton Way submarket topping the growth at 3.7% QoQ.

[yanziyang]

Prices of Grade A offices climbed 4.6% to $2,667psf. It's been rising for 2 consecutive quarters.

According to Savills, even as investment activity in the office sector moderated in Q1/2013, record prices have been achieved.

Buoyant take-up of newly launched strata office units, such as SBF Center on Robinson Road, reignited buying interest in the market and drove up prices of older projects.

Here's more from Savills:

Caveats showed that the whole 20/F and a unit on the 15/F of Suntec City Tower 2 were sold at S$2,750 per sq ft of strata area.

This is the third highest unit price for Suntec City Towers since 2011. In addition, a unit on the 13/F of Samsung Hub was transacted at S$3,150 per sq ft in March, setting another new high.

Therefore, capital values of Grade A offices continued to climb for the second successive quarter, up 4.6% QoQ to S$2,667 per sq ft in Q1/2013.