Summary

Negative fallout arising from the prolonged financial turbulence and global economic slowdown has intensified, resulting in slower absorption of Grade A office space. This has continued to push up vacancy rates and put downward pressure on rents in the CBD.

Key points:

- Leasing activity remained subdued as a result of softening demand and cautious market sentiment.

- There has been a sharp decline in hiring expectations from the banking and financial services sector amid ongoing economic volatility.

- Vacancy rates in CBD Grade A office buildings climbed to 6.9%.

- Grade A rents continued to slip by 1.5% for the second consecutive quarter.

- Investment activity of en-bloc office space resumed, but Grade A capital values fell by 3.8% quarter-on-quarter.

- Only two sites were offered for office development under the Reserve List of the 1H/2012 Government Land Sales (GLS) Programme.

- The weaker economic outlook for 2012 will adversely affect the leasing market, with Grade A rents expected to fall by 15% and capital values by 10% during the year.

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