Net demand for office space in Singapore in 2014 was slightly lower at 1.36 million sq ft in 2014, as compared to 1.45 million sq ft for 2013, property consultancy DT said in a report released on Tuesday.
Although islandwide occupancy stayed above 90 per cent, it declined 2.3 percentage points in the last three months of the year from the previous quarter. According to the basket of office buildings tracked by DTZ, only Marina Bay registered a growth in occupancy rate by 3.2 percentage points over the last quarter.
Average monthly gross rents in the CBD rose between 2.4 per cent and 4.0 per cent quarter on quarter in Q4, with office space in Marina Bay registering the highest increase in rent to $13.25 per sq ft.
The average monthly gross rents for offices in the CBD rose between 4.0 per cent and 19.0 per cent for the whole of 2014, much higher than the 2.4-6.1 per cent increases for 2013, DTZ said.
The firm said rising rent levels in 2014 have encouraged more traditional office users, such as banks, to move their backend operations to some high-tech industrial space and business parks. However, landlords that are anticipating rents to increase in 2015 were willing to wait than lock in at lower rents in this quarter.
DTZ said office rents are likely to continue rising next year, but at a slower rate. There will be more demand for space from technology, media and telecommunications (TMT) sector, serviced office operators and insurance sector. But rental expectations will be mitigated by the 1.1 million sq ft of space (reduced from 1.3 million sq ft in Q3) that will be released due to leases expiring next year along with 214,000 sq ft of future shadow space.
DTZ said firms in the TMT sector are willing to pay higher rents to locate in prime office districts to attract talent and to strengthen their brand positioning. Google recently expanded in Asia Square and LinkedIn doubled their office footprint by taking space at Marina Bay Financial Centre 2.
Said Mr Ong Choon Fah, DTZ'S regional head (SEA) of consulting & research: "Growth in the TMT firms is supported through growth in cloud technology, social media, internet, and big data. As these TMT firms expand, they are more inclined to seek out prime office buildings situated in Marina Bay or newly completed buildings such as CapitaGreen."
"Another growing sector to consider in the office market today is serviced offices. Serviced offices have been expanding as swing space and co-working spaces are increasingly sought after due to their flexibility."