Demand for office space lifts prices in Singapore's CBD in Q2 2014

SINGAPORE - Continued interest in strata office units and en bloc office deals gave a boost to central business district (CBD) office prices in the second quarter of this year, property consultancy DTZ said in a report on Monday.

This interest was on the back of "expectations of further rental increases" in the sector, said Southeast Asia research head Lee Lay Keng.

Average office prices inched up 0.5 per cent in Raffles Place and 0.2 per cent in the area spanning Shenton Way to Cecil Street in April through June from the three months before, going by a basket of properties DTZ tracked.

Rents grew the fastest in the Marina Bay area, where the average gross rent rose 6.5 per cent to $12.25 per sq ft (psf) per month in the second quarter from the first.

"With no new supply in the CBD until the completion of CapitaGreen at the end of this year, leasing interest for Asia Square Tower 2 remains strong. For instance, Vodafone recently signed a lease for 30,000 sq ft at Asia Square Tower 2," DTZ added.

CapitaGreen, which is on the site of the former Market Street Carpark, is 21 per cent pre-committed.

However, gross rents in the older part of the CBD around Shenton Way, Robinson Road and Cecil Street remained stagnant at $8.00 psf per month on average.

DTZ estimated that around 2.7 million sq ft of office space will be completed between now and the end of next year, which would likely translate to "healthy" activity in the office market in the near future.

Beyond next year, however, the pipeline supply of office space will reach a new peak of about 3.9 million sq ft in 2016, with about 60 per cent of that located in the CBD, it said.

Major iconic and premium office buildings expected to be completed in 2016 include Marina One in Marina Bay, Guoco Tower in Tanjong Pagar and Duo Tower in Bugis.