哇：DJ FOCUS: Singapore Office Rents Set To Fall As Buildings Rise(ZT)

DJ FOCUS: Singapore Office Rents Set To Fall As Buildings Rise


By Patricia Kowsmann
Of DOW JONES NEWSWIRES


SINGAPORE (Dow Jones)--Singapore's booming office market is now facing a drop in demand and a slowdown in rents that have many wondering: what happens next, when a host of new developments are launched on the island?

Tight office supply and high demand, mostly from financial institutions, has made Singapore the ninth most expensive office market in the world, ahead of rival Hong Kong, according to property consultant CB Richard Ellis. Rents in Singapore nearly doubled on-year in 2007, after increasing more than 50% in 2006.

Fearing the island would lose competitiveness, though, the government, which controls the release of sites for office, residential and commercial construction, started boosting land supply over the past two years. But a global financial crisis that has made companies increasingly cost conscious, coupled with an increase in supply, is sounding alarm bells for analysts covering the sector.

"We are increasingly concerned about the risk of demand falling short of expectations," Citigroup said in a report.

"The strong Singapore dollar, the high rental rates, the slowing economy and the uncertainties surrounding the financial industries are likely to put a lid on new demand for office space."

Citigroup estimates that rents could fall 30% to 35% by 2011 as a host of new office buildings are expected to be ready for occupancy.

Singapore currently has 71 million square feet of office space, and is expected to add about 10 million by 2012.

Official second-quarter figures on office rents and occupancy aren't out yet, but according to CB Richard Ellis, average prime and top classed Grade A office rents edged up just 0.8% and 0.6%, respectively, in the quarter over the previous three months. And even though Grade A office vacancies remained tight at less than 1%, the rate just outside the central business district rose to 7% from 4.6%.

Government figures for the first quarter of the year already show vacant office space in the island grew slightly over the previous three months, while the pace of rental increase has slowed considerably since the second half of last year.

On Thursday, Singapore's central bank said the rate of acceleration in commercial rents has likely peaked.



Rents To Fall, But Pain Could Be Delayed For Some



While landlords, including real estate investment trusts, will obviously feel any pinch arising from lower rents, there could be a lag before the pain sets in.

According to Kim Eng analysts Wilson Liew, many property owners are still charging rents locked in years ago, which are probably still below market prices in the near future.

He estimates rents should fall to S$15 to S$16 per square foot over two to three years, from a current average rate of S$18.

Heavyweight real estate investment trust CapitaCommercial Trust (C61U.SG), however, is less pessimistic about the near term, saying Wednesday that, because of tight supply, office rents should remain relatively stable over the next two years, although it still expects a decline in 2010 and hasn't given estimates for 2011 - when the bulk of new supply will come online.

"Beyond that, it depends on what the take-up will be for the new buildings," said Lynette Leong, chief executive of CapitaCommercial Trust Management Ltd., the trust's manager.

Nobody is suggesting the market is in for a hard landing, but already, many companies that rent are beginning to reevaluate their leasing strategies.

"In the wake of unceasing uncertainties in the wider economies and high office rentals, more companies are adopting a cautious business approach," real estate adviser DTZ said.

That includes renting offices in Singapore's suburbs to avoid the high rents and the space crunch of the business district, DTZ added.

Indeed, some areas in the suburb have become favorites among many companies, including banks.

Citibank, DBS Group and Standard Chartered have all announced plans to expand or relocate some operations to a business park close to the island's airport.



Amid Softer Market, High Rents Limited To Prime Developments



Most companies, however, are likely to locate only secondary offices out of the city center, with headquarters remaining in prestigious - and highly visible - downtown developments. In fact, many have already taken up space in the Marina Bay Financial Center, an upcoming development that will become the city-state's business district center.

Standard Chartered Bank is slated to occupy many floors of the center in 2010, while DBS Group will move its headquarters there in 2012.

According to analysts, buildings like the Marina Bay are likely to attract tenants at still high prices because of their location and quality.

"We want our headquarters building to continue to be located prominently in a modern facility at the heart of Singapore's financial district," DBS' former chief executive, Jackson Tai, said when the bank announced the move in December.

In addition, companies that have left the business district or that are waiting for the supply crunch to expand could find opportunities again once the new office space becomes available.

"It's like the two sides of a coin. Prices will come down, but that will attract new businesses and more tenants to the market again," Kim Eng's Liew said.



-By Patricia Kowsmann, Dow Jones Newswires; 65 6415 4157; patricia.kowsmann@dowjones.com



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(END) Dow Jones Newswires

July 24, 2008 00:41 ET (04:41 GMT)

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