Office rents in Singapore's central business district (CBD) rose in the first quarter of this year to their highest levels in more than two years, according to a report by property consultancy Colliers International on Wednesday.
The firm said the improvement was due to faster-than-expected economic recoveries in the United States and Europe, which led to more demand for office leasing.
Companies are gearing up for growth and are also more actively reviewing their expansion and relocation options in order to lock in rents, Colliers added.
Average monthly gross rents for premium and Grade A office space in the CBD grew 3.2 per cent in January through March this year from the preceding three months. Premium office space, which includes buildings such as Asia Square and Marina Bay Financial Centre, is the best available and is a rung above Grade A.
Rents for these offices hit $8.99 per sq ft (psf) in the first three months of this year, the highest level since the fourth quarter of 2011, said Colliers.
The consultancy expects such rents to continue rising this year by up to 15 per cent.
The overall average occupancy rate for premium and Grade A office space also expanded from 93.9 per cent in the fourth quarter last year to 95.9 per cent in the first quarter this year.
Colliers said prices for premium office space in the Raffles Place and Marina Bay area held steady at an average of $2,667 psf in the first quarter from the three months before. For Grade A office space in this area, prices inched up 0.2 per cent to $2,400 psf.
"As the global markets improve with returning business confidence in recent years, we see companies positioning themselves to take advantage of the growth in Asia," said Mr Marcus Loo, Colliers' executive director of office services. "Companies look for modern and efficient floor space to house their operations."
He added that firms from the insurance, commodities and information and communications-related industries were "seeking to explore" different leasing options before their leases expired.
This could potentially translate to more office leases signed in the next six to 12 months, he said.
Colliers research head Chia Siew Chuin said the pipeline for new premium and Grade A office supply for the rest of this year and next year remains limited. Only CapitaGreen, South Beach and Westgate Tower are expected to be completed in this period.