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THE strong demand for prime office space in Singapore has filtered down to the suburbs, pushing rents and occupancy rates in these not-so-prime vicinities up to their highest levels in years.

Areas such as Tampines, Jurong East, Thomson and Novena - known in the office space market as 'decentralised areas' - were at almost full occupancy last quarter, hitting rates of 98 per cent, said property consultancy CB Richard Ellis (CBRE) yesterday.

A separate report by Jones Lang LaSalle (JLL), also released yesterday, noted that rents in the decentralised areas for the April to June quarter were 16.4 per cent up on the preceding three months - the highest quarterly growth since 2000.

Average monthly rents for this segment rose to $3.55 per sq ft (psf) in the second quarter, up from $3.05 psf in the first three months, said JLL regional director Chris Archibold.

The surge in demand for suburban office space is largely due to a spillover of demand for Grade A offices, where rents are rising steadily. They climbed 13.3 per cent in the last quarter to an average $6.80 psf per month, said CBRE. Grade A is the highest quality of office space and tends to be located in prime districts such as Orchard Road, Raffles Place, Tanjong Pagar and Marina Centre.

Offices in this segment reached occupancy levels of 97.3 per cent in the second quarter - the highest since the first three months of 2001, according to CBRE.

Office space in Singapore is experiencing a surge in rents across all segments, as economic growth and improving business sentiment boost tenant demand, while the supply of space remains limited.

From now until 2010, the supply of office space is expected to average only 600,000 sq ft a year, while office take-up is projected to be above two million sq ft for this year alone, said the CBRE report.

'With tenant demand expected to remain strong, the limited supply over the next five years could start to impact occupiers' ability to accommodate space expansion,' said CBRE's executive director of office services, Mr Moray Armstrong.

'Tenants looking for CBD space may have to compromise their preferred location, while having to face up to higher rents across all office grades,' he added.

But JLL's Mr Archibold pointed out that average office rents are still well below their peaks of past years - 18 per cent lower than in 2001 and 36 per cent lower than in 1996.

fiochan@sph.com.sg

Going up

Buildings like AIA Building in Tampines and JTC Summit in Jurong East are benefiting from a spillover in demand for Grade A offices.

Office space in these decentralised areas were at almost full occupancy last quarter, hitting rates of 98 per cent, says CBRE.

A separate report by JLL shows that rents in the decentralised areas for April to June quarter were 16.4 per cent up on the preceding three months, the highest quarterly rise since 2000.

Office space in Singapore is experiencing a surge in rents across all segments, as economic growth and improving business sentiment boost tenant demand, while the supply remains limited.