Singapore will contribute 3% of world's total new office supply in 2011:CBRE

CBRE forecasts that 62% of all new office developments in 2011 will take place in Asia.

According to CBRE's latest Global Office MarketView report, the commercial office recovery is disparate and divergent.

“The decline in demand is over for most markets, but vacancy rates remain elevated and will impede the near- term performance of rental rates,” said Dr. Raymond Torto, CBRE’s Global C hief Economist. “Job growth also has a long path toward improvement in both the U.S. and European markets, albeit not in most of Asia, and will continue to slow the recovery of the global office market.”

In Singapore, additional available space is expected to come onto the market in the coming years, as around 7.0 million sq. ft. of office space is targeted for completion from Q 2 2011 to 2015, 54 per cent of which is classified as Grade A space.

Moray Armstrong, Executive Director, Office Services in Singapore said “A greater certainly on Singapore’s future supply is emerging. This will likely moderate rental growth in the short to medium term although we forsee Singapore rents still trending upwards over a three to four year horizon”.

The Singapore and Chinese office markets witnessed the most significant rises in rental levels, fourth quarter of 2010 over the third quarter of 2010.

Singapore’s Grade A office market enjoyed an upbeat fourth quarter of 2010, with prime office rents averaging S$8.30 psf per month, reflecting an increase of 12.2 per cent quarter over quarter and 23 per cent year-on-year.

“Multinational and trans-national companies continue to fuel the Asia Pacific office market, as the region witnessed a return to levels of demand not seen since prior to the global financial crisis,” said Nick Axford, CB Richard Ellis’ Head of Research for Asia Pacific. “Requests for further rises in MNC budgets may come under closer scrutiny as headquarters seek to control growth in global corporate spending, despite the fact that many of them have plans to increase their headcount in Asia in 2011.”

Mr Armstrong added “Singapore has a particularly generous new office supply pipeline. In full year 2011, 3.0 million sq. ft. will complete, representing a very sizeable three per cent share of the total worldwide new office supply for this year. Notwithstanding the high volume of space, the fact that 54 per cent of new office space is already committed is testament to the strength of the office market here. We are not at all concerned about Singapore’s ability to absorb supply. On the contrary, we believe Singapore’s office position right now looks particularly favourable and offers multinationals great opportunity to secure quality space”.

The following trends are driving the global office market:

• Many office markets continue to experience a “flight to quality” by which tenants are taking advantage of low rents for prime office space and many occupants are seizing the opportunity to upgrade or expand their office space into newer, higher- quality space.
• Much of the recent office developm ent activity is occurring not in the world’s developed economies, but in emerging markets where strong economic growth persists. In 2010 43 million sq. ft. of newly developed office space introduced into the market was in Asia— 46 per cent of the global total. In 2011, CBRE forecasts that nearly 55 million sq. ft. of new office developm ents will take place in Asia, or 62 per cent of the global total.
• The markets that are seeing accelerated improvements in rents, such as New York, Washington, DC , Sydney, London’s West End, Singapore, Paris and Hong Kong are areas that have also experienced strong job and economic recoveries. On the other hand, economies such as Los Angeles, Chicago, Auckland, Mexico City and Madrid, have yet to turn but they are seeing the decline in rents slowing or at bottom.
• All three regions observed improved net absorption over the course of 2010, and this trend is expected to continue during the next few years. Each year will be better than the last, if the issues of European Sovereign Debt, the price of oil and the US deficit and debt do not disturb economic progress.