posted Dec 17, 2015, 12:28 AM by Benjamin Ng   [ updated Dec 17, 2015, 12:31 AM ]

Raffles Place continues to enjoy high occupancy and positive absorption, revealed a Cushman & Wakefield report.

Occupancy rate hit a high of 97.1 percent in Q3 2015, up from 96.5 percent in Q2 2015. As at end-November, occupancy at Raffles Place climbed further to 97.2 percent, which is higher than the 95.9 percent average overall occupancy of CBD Grade A office.

Meanwhile, net absorption for Grade A office at Raffles Place stood at 110,000 sq ft year-to-date.

The report attributed the resilience to “strong tenant loyalty, no Grade A office supply and stable rental growth.”

According to Cushman & Wakefield, Raffles Place will continue to attract and retain tenants ranging from 10,000 to 20,000 sq ft considering the strong employee preference towards the area’s transport connectivity and F&B retail.

However, it noted that while Grade A office supply will reach by around four million square feet in 2016, none will occur in Raffles Place.

Nonetheless, the rental gap between Marina Bay and Raffles Place continued to narrow.

Raffles Place saw effective Grade A rent stand at S$10.31 per sq ft per month in Q3 2015, while that at Marina Bay was at S$10.70 per sq ft per month.

“The rental gap currently stands at four percent, the lowest since 2011, down from as high as 31 percent in 2013.”

Cushman & Wakefield said the gap is expected to widen again and revert to 20-30 percent as Marina Bay office rents stabilise and when overall CBD occupancy rate recovers from a potential dip in the next two years.

“Singapore office leasing market is approaching another fundamental shift as the CBD enters the second phase of its transformation with the supply of four million sq ft of prime Grade A office space in 2016. This will provide opportunities for larger occupiers to rationalize their portfolio and grow their businesses,” said Toby Dodd, Managing Director of Cushman & Wakefield Singapore.

Cushman & Wakefield data showed that at least 50 large tenants each occupying over 25,000 sq ft of space have not moved since 2007. This second phase of transformation could see some firms relooking their business consolidation or expansion plans.

Notably, tenants eyeing a “flight-to-quality” strategy could consider new mixed-use developments including Marina One (1.88 million sq ft) in Marina Bay, Guoco Tower (900,000 sq ft) in Tanjong Pagar and DUO (570,000 sq ft) in Bugis.

Through this cycle, Raffles Place will continue to attract and retain mid-size occupiers with proactive asset management and strengthened landlord and tenant relationships, said Dodd.