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SG Tech companies spur rental growth in CBD

Property Here - Thursday, November 28, 2013

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Traditionally occupied by financial institutions, the central business district is witnessing a new trend of consumer Internet companies taking up large spaces in prime Grade A office buildings, according to Cushman & Wakefield and reported in the media.

This comes amid increasing rents due to healthy demand and lack of new supply. 

Notably, rents at Marina Bay moved up 0.85 percent to S$11.80 psf per month from S$11.70 psf per month in Q3, while Raffles Place rents grew 0.67 percent quarter-on-quarter to S$9 psf per month. Over at Shenton Way, rents have climbed 0.99 percent to S$8.20 psf per month.

Outside of the CBD, Grade A rents at Orchard Road posted the highest increase, climbing 2.2 percent to S$9.20 psf per month.

Overall, Grade A rents increased 1.1 percent quarter-on-quarter to S$9.38 psf per month in Q4.

Meanwhile, average vacancy levels for the Grade A market declined by 58 basis points to 4.9 percent as at end-2013. The CBD area also witnessed a drop in vacancy levels, with the average rate at Marina Bay slipping by more than one percentage point quarter-on-quarter to 10.1 percent, while Shenton Way and Raffles Place recorded vacancy rates of 3.2 percent and four percent respectively.

The drop in vacancy levels in the CBD is partly attributed to the rising trend of consumer Internet companies taking up huge spaces in prime Grade A buildings. 

For instance, Booking.com is set to occupy around 45,000 sq ft at Marina Bay Financial Centre Tower 3, while Google plans to increase its presence in Asia Square Tower 1. PayPal is also looking to grow its presence at Millenia Tower. 

The healthy absorption was also supported by recent deals such as Rabobank looking to take up 26,000 sq ft of space at South Beach and Mizuho’s plan to take more than 100,000 sq ft at Asia Square Tower 2.