Average monthly gross rents of Grade A office space islandwide saw a 6 per cent quarter-on-quarter growth in the second quarter.

Grade A office space in the Raffles Place/New Downtown and Marina/ City Hall areas made the largest gains, rising 7 per cent to $10.40 per square foot (psf) per month and 7.2 per cent to $9.50 psf per month, respectively.

This is according to Colliers International’s latest property market research report released yesterday.

Despite the latest increase, Grade A office rents remain about 37.4 per cent below the peak of $14.22 psf per month seen in the third quarter of 2008.

Calvin Yeo, executive director of office services at Colliers, credits the release of government land sites with meeting the demand for office space and thereby contributing to a gentle recovery of rents. ‘Additionally, competition for tenants . . . has helped to keep the rental growth of Grade A office space, specifically in the Raffles Place/New Downtown micro-market, in check,’ he added.

Occupancy rates for Grade A office space, meanwhile, fell to 93.5 per cent in the second quarter, following a 0.1 per cent dip to 94.2 per cent in the first quarter. The drop was most evident in the Raffles Place and Beach Road micro-markets, where the rate fell 1.5 per cent and 3.2 per cent respectively. In contrast, the Orchard Road micro-market managed an increase of 0.9 per cent.

Mr Yeo put the drop in occupancy rates down to a rise in the supply of space from the ‘gradual completion of new office developments, as well as the impending secondary office space that would re-enter the market when tenants relocate to their pre-committed new premises’.

‘New office and business park developments outside the CBD, which offer office-like specifications at comparatively lower rent . . . add to the rising supply of space in the market,’ he said.

Growth of the office property sales market remained strong, the report said.

Date: 29 June 2011 | For the full report, please visit www.businesstimes.com.sg