OFFICE SPACE       RENTS       ECONOMY

Singapore – The weakening economy is starting to affect prime office spaces as vacancy rates rise to 6.9% in the last quarter of 2011, after remaining below the 5% mark for five consecutive quarters.

The report by Savills Singapore also found rents of these buildings dipped from S$8.86 psf to S$8.71, quarter-on-quarter. Rents for international grade buildings, which are above Grade A ones, also fell 4.6% as landlords struggle to attract tenants.

Savills said although the average office rents are still 7.8% higher in 2011 than 2010, prices for Grade A offices are beginning to dwindle. The firm said these downturns are a result of “weakening sentiment in the job market as the economy slows”, The Straits Times reported.

Savills added the banking and financial services sector was the worst hit, and accounts for a vast majority of office space. The report also said offices in Shenton Way and City Hall are most affected because of un-let and “shadow space” in newly completed buildings. Shadow space refers to excess space rented out to tenants to sublet.

However, some sectors such as retail and tourism are still going strong. Colin Tan, head of research at Suntec Chesterton International, said as those sectors are renting B- and C-grade offices, they may not be as affected at the moment. But he does expect the weak market sentiment to soon affect other business spaces.

Ku Swee Yong, chief executive of International Property Advisor, said the surplus in office spaces will worsen when more Grade A buildings, including the Marina Bay Financial Centre Tower 3 and Asia Square Tower 2, are completed over the next few years. 

Agnes Tay, Savills’ director of commercial, expects companies to be more cautious with their expansion plans this year, and added many are likely to sub-let excess space. She also said leasing activities might slow down as Grade A rents are anticipated to fall by 15% this year.
_______________________________________________________________________________

To subscribe to Human Resources' monthly print magazines and daily online newsletters, please go to http://www.humanresourcesonline.net/subscribe/

To get the latest HR news to your desktop or mobile, follow Human Resources on Twitter and Facebook

To view exclusive HRTV videos and commentary on HR issues, visit The Office Snitch

More quality Lighthouse titles

Get your marketing department up to speed with Asia's most read marketing site
marketing-interactive.com

Want to get on the right side of the procurement department?
Direct them to Procurement Asia