A LACK of office space could drive up rents at a faster pace in Singapore than anywhere else in the world this year, according to a report from property consultancy JLL.
JLL analysts told The Straits Times that skyrocketing rents here could in turn entice foreign funds, particularly those from the United States, to invest in the sector.
Prime office rents in the Central Business District (CBD) could climb by as much as 15 per cent to 16 per cent this year from last year, said JLL's head of research for Singapore and South-east Asia, Dr Chua Yang Liang.
In particular, rents for the newer offices in Marina Bay could increase by 16 per cent to 17 per cent over the same period.
This means that prime offices here are "predicted to top the rental growth league table" this year out of 25 markets worldwide, the report said, edging out major global cities like Dubai, London, New York and San Francisco.
Dr Chua added that rents were expected to shoot up this year due to limited supply, but could ease around 2016 once more office developments are completed.
He said: "Occupiers continue to renew their leases, so that's giving some positive sentiments to landlords... In the short term, there's a mismatch of demand and supply."
JLL Asia-Pacific research head Jane Murray said vacancy rates in Singapore have fallen "quite significantly".
"People were worried about oversupply for a while but it hasn't quite eventuated."
The buoyancy of the office market stands in stark contrast to the residential sector, where prices and rents have been dampened under several rounds of property market curbs.
JLL analysts said the strength of Singapore's office sector could draw interest from foreign investors.
US investors, rather than those from Europe, would likely be keener on Singapore, they said.
"There are a lot of funds from the US that are actively looking," said JLL research head for North and South America Benjamin Breslau.
JLL's head of research for Europe, the Middle East and Africa, Dr Lee Elliott, said investor interest from Europe would probably be less as funds there have many opportunities closer to home.
The size of the Singapore market, however, may deter foreign investment.
"Singapore is a relatively small market so sourcing for opportunities is harder compared to the US and Europe," said Dr Murray.
Mr Breslau added that office blocks here tended to be "relatively tightly held", meaning many owners do not want to sell.
CapitaGreen, a 700,000 sq ft office tower in the CBD, is expected to be completed by the end of this year.
The office components of mixed developments such as South Beach near Raffles Hotel, DUO in Bugis and Marina One in Marina Bay could also be completed within the next few years.