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SINGAPORE, 24 September 2012 – Office rents stabilised during the third quarter of 2012, bringing some optimism to the office market which has been hit by weak demand since the EU debt crisis returned fear to the global economy a year ago. According to Jones Lang LaSalle’s data, average gross effective rents for Raffles Place (excluding Marina Bay) Grade A office declined by just 1.1% q-o-q to SGD 9.10 per sq ft per month in 3Q12. This rate of decline is similar to the rate observed in 2Q12. Average rents in the Shenton Way and Marina Centre submarkets similarly showed moderate decline at 0.8% and 1.3% q-o-q respectively - almost half the 1.6% and 1.9% quarterly decline seen in 2Q12. These numbers point to relatively stable market conditions.However, demand was fairly muted during the quarter, with leasing transactions in the core CBD area largely supported by smaller office tenants. Examples of this being Reed Smith, a US legal firm, which marked its first entry to Singapore by taking up 10,000 sq ft of space in Ocean Financial Centre whilst shipping firm Tokyo Marine relocated its operations in 16,000 sq ft of space in DBS Centre Tower 2 from SGX Centre. Some larger office tenants are currently focused on exploring their options to decentralise business operations in order to save costs, whilst quite a number are adopting a wait-and-see approach due to concerns over the economic situation in Europe.
While the latest QE3 action by the Fed is likely to boost business confidence, business hiring and expansion are not expected to see a strong impact in the near term. Companies are likely to maintain the status quo by keeping business costs low and stay selective on business hiring, as they await more positive economic data. Chris Archibold, Head of Markets at Jones Lang LaSalle commented, “More companies are now required to tighten their budgets, with many having to first show that they can either reduce or keep operational costs low before gaining the green light to spend on capital expenditure which would come with expansion or relocation. That said, there is still a good level of activity amongst smaller occupiers” As the financial year comes to a close, many major corporate decisions are likely to be put off until early next year with a view to having a better understanding of how the economic situation in Europe will evolve. As such, office demand is expected to remain fairly slow. Nevertheless, Dr Chua Yang Liang, Head of Research at Jones Lang LaSalle, sees the recent market weakness as an opportunity for businesses to consolidate their operations and look towards regional markets for opportunities. He adds, “Despite the global slowdown, growth in major Asia economies are still well ahead of those in the US and EU. The wealth accumulated on the back of the strong Asian economic growth in the past two years provides policymakers sufficient resources to spur their domestic growth, in the event of a prolonged slowdown.” – ends –Notes to editorsAbout Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.2 billion of assets under management. Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 22,200 employees operating in 79 offices in 14 countries across the region. The firm was named ‘Best Property Consultancy’ in nine Asia Pacific countries at the International Property Awards Asia Pacific 2012, in association with HSBC, and was highly commended in a further three countries. For further information, please visit www.ap.joneslanglasalle.com200 East Randolph Drive Chicago Illinois 60601 │ 22 Hanover Square London W1A 2BN │ 9 Raffles Place #39–00 Republic Plaza Singapore 048619
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