Colliers- “Tenants Look for longer Office Lease Terms”

 

According to the report and sources by Colliers International, the number of tenants who are seeking for longer leasing terms are significantly increasing.

Marcus Loo, Executive Director for Office Services said, “We are seeing more requests from tenants negotiating for longer lease terms, as it provides them with more stability and allows them to spread their asset depreciation over a longer period of time.” He also added that this setup reduces the cost in occupancy and capital expenditure when moving into a new office.

He added, “However, contrary to the common belief, longer lease terms do not generally equate to lower rents. Landlords may factor in potential rental upside if they are tied to a longer period of time. Hence, tenants who prefer a longer term will have to weigh the merits of an extended period vis-à-vis a higher rent.”

In 2014’s third quarter, rental growth of grade office space in Raffles Place and New Downtown increased by 6.1 percent to S$11.67 per square feet per month in comparison to the previous quarter’s percentage. This is considered to be the highest quarterly increase in 3 years.

In addition, rents of Grade A office space significantly rose between 0.4 percent and 2.9 percent on a quarterly basis.

Typical month-to-month gross rents of premium grade workplace in Raffles Place/New Downtown increased by about 13.3 percent throughout the first three quarters of 2014, while Grade A and B workplace areas published smaller gains of 6.4 percent and 3.9 percent respectively, according to the report.

Provided the considerable gain in rental prices, there was a boost in the variety of viewings rather than lease dedications during Q3 2014, “as tenants are taking a longer time to workout their sums,” added Loo.

Chia Siew Chuin of Colliers International’s Director of Research & Advisory said, “Rents of premium grade office space in Raffles Place/New Downtown are expected to continue to increase and record a full-year ascent of close to 15 percent for the entire 2014, while the growth in rents for the overall CBD Grade A and B office space could reach up to 10 percent.”