Healthy demand for Business Parks due to attractive rents - possible undersupply after 2016

Islandwide vacancy rates for business parks declined to 9.1% as at end of 1H2015, with an estimated 306,000 sqft of business park space taken up during 2Q2015. According to CBRE, demand for business park space was mainly driven by pharmaceutical and tech firms.

In 2Q2015, rents in the city fringe sub-market held firm at $5.50 psf/month and rents in the rest of island sub-market maintained at $3.85 psf/month from 1Q2015 as landlords continued to focus on occupancy levels by keeping rents attractive.

Pre-commitment in pipeline projects gained momentum in the quarter. Notably, Mapletree Business City II (MBC II) secured its first tenants – including a multi-national technology firm leasing 270,000 sqft as well as medical equipment company, Covidien, which leased about 56,000 sqft.

Based on CBRE Research’s analysis, there is currently 2.93 million sqft of future business park space due to be completed from 3Q2015 to end 2016, with almost 60 per cent of this supply pre-commited ahead of completion. There is no new business park space available post-2016, which will reduce vacancy and lead to a possible undersupply situation.