SINGAPORE - The business and science park market is thriving and as in the commercial office market of today, there has been a flight by tenants to new buildings with quality specifications and in better locations.
Real estate consultant CBRE observes that tenants have been taking advantage of competitive rents in these new developments and consolidating their operations.
With the business park market continuing to record positive net absorption in Q1 2013, new buildings with quality specifications saw an increased take-up in the quarter, in places such as one-north, Mapletree Business City, and Changi Business Park, CBRE said on Monday.
The vacancy rate has fallen to 6.4 per cent from 7.2 per cent last quarter, with the key drivers of demand coming from the financial, pharmaceutical, media and IT industries.
Average rents have levelled out at $3.80 per square foot per month since the third quarter of 2012.
CBRE cited Ericsson's lease in One@Changi City, and the planned expansion of an unnamed financial institution in Mapletree Business City as examples of tenants taking advantage of competitive rents in new developments and consolidating their operations.
This flight to quality developments has coaxed older parks to undergo asset enhancement or redevelopment to remain relevant, as seen in the refurbishment of the former Ultro Building in Changi Business Park.
Michael Tay, executive director of office services at CBRE, observed the development of a "two-tier business and science park sector" differentiated by location and, to an extent, building specifications.
"At the moment, city fringe business parks such as Mapletree Business City and one-north can command a premium in rent of about 20 per cent to 30 per cent over business parks in outlying locations. Despite this premium, some occupiers are still attracted to these developments due to their location and quality," he said.