NET new office demand surged to 753,473 square feet in the fourth quarter of 2010, the highest quarterly take-up since Q1 2007, according to latest government numbers.
The fourth-quarter take-up was triple the 258,334 sq ft for the preceding quarter and took the total for 2010 to 1.65 million sq ft, a sharp reversal of negative demand of about 236,806 sq ft in 2009.
'This once again demonstrates the fast recovery in the office market and the voracious appetite of office occupiers for expansion space whenever the economy picks up,' said CB Richard Ellis (CBRE) executive director Li Hiaw Ho.
The Urban Redevelopment Authority's islandwide office vacancy rate, which had spiked to 13 per cent at end-Q3 2010 (from 12.3 per cent at end-Q2) eased to 12.1 per cent at the end of last year - as tenants moved into recently completed office projects.
Most of the new project completions last year took place in the first three quarters, such as Marina Bay Financial Centre (MBFC) Tower 1 in Q1, Mapletree Business City in Q2 and MBFC Tower 2 in Q3.
The islandwide stock of office space rose 2.6 per cent to nearly 76 million sq ft at the end of last year, from about 74 million sq ft at end-2009.
URA's office rental index rose 4.7 per cent quarter on quarter in Q4, slowing from the 6 per cent gain in Q3. For the whole of last year, the index appreciated 12.6 per cent, a marked turnaround from a drop of 23.6 per cent in 2009. The latest index, however, is nearly 20.2 per cent below its previous peak in Q2 2008.
According to CBRE's numbers, the average gross monthly rental value for Grade A office space climbed 22.2 per cent last year to $9.90 per square foot (psf) but is still 47.3 per cent shy of the recent high of $18.80 psf in Q3 2008.
Property consultants are generally predicting an increase of around 15 per cent in Grade A office rents this year.
Agnes Tay, Savills Singapore director (commercial leasing), said that over the next two years, there would be considerable secondary office stock being returned to the market as occupiers vacate existing premises to move to newly completed office developments.
'However, the impact of secondary stock is likely to be cushioned by a reduction in supply from demolition or refurbishment of a number of older office blocks. On the demand side too, a healthy 54 per cent of the new office space to be completed in the CBD in 2011-2012 has already been pre-committed.
'Savills has identified an inflection point appearing in late 2011 when the return of secondary stock will impact the market. At this point, we expect to see a greater spread in rents between the international Grade office space and the rest of the market.'
URA's shop rental index recovered 2.9 per cent last year, against a 7.4 per cent drop in 2009.
Amid Singapore's economic recovery, the rental indices for flatted factory and warehouse space appreciated 11.7 per cent and 17.7 per cent - against respective declines of 12.1 per cent and 15.6 per cent in 2009.