Wednesday-29 January 2014
New enquiries and completed deals in the last couple of quarters were concentrated in the newer developments in the city fringe. Developments in the pipeline also attracted pre-commitment interest from qualifying Business Park occupiers looking for long term accommodation. The two main multi-user developments, Fusionopolis Phase 2A and Galaxis (Fusionopolis Phase 5) have secured pre-commitments with the latter development seeing keen interest from technology-related companies. This demand, coupled with built-to-suits have driven pre-commitment levels to 70% and 97% respectively as at end January 2014, for new developments completing in 2014 and 2015.
Occupier activity for mature business parks in the rest of the island was muted in comparison within the same period. Older developments in Changi Business Park and International Business Park face pressure in maintaining occupancy levels due to their anchor tenants relocating to newer projects and/or consolidating their operations. In order to remain relevant and competitive, Landlords are taking this opportunity when occupancies are lower to carry out upgrades to these buildings. This is evident in 1 Changi Business Park Avenue 1 (former Ultro Building), The Signature and 31 International Business Park (former Creative Resource Building).
Michael Tay, Executive Director, Office Services said “The relocation of major occupiers in the last quarter of 2013 has led to an increase in secondary space in this segment of the market. Leasing activities for such space has been relatively slower than that for new buildings. These are the main reasons behind the average vacancy rate rising from 7.5 per cent to 9.3 per cent in the last three months of 2013.”
The availability of secondary stock has impacted the average rent for Business Parks, which stayed flat in Q4 2013. Based on CBRE’s basket, the average rent of Business Parks in the city fringe stayed flat from the previous quarter, Q3 2013, at $5.40 psf/ month. Average rents of Business Parks in the rest of the island remained at $3.85 psf/ month.
The outlook for 2014, nevertheless, remains optimistic for the entire market. Demand is expected to be supported by improvements in macroeconomic fundamentals and the continued expansion of Business Park occupiers in the decentralised areas.
Mr Tay added “With a significant portion of speculative supply for 2014 committed, existing vacant space is likely to be absorbed on the back of healthy demand. Driven by strong pre-commitments, rents in new developments will edge up but this increase is likely to be restrained by older assets that offer more competitive rents.”
Overall, the Business Park market is expected to remain stable for the year. Business Park rents are expected to rise in tandem with the projected increase in office rents.
END
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Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
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