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The average monthly gross rents in the CBD fell 4.1 percent quarter-on-quarter to S$10.40 per sq ft in Q3 2015, or its first decline since 2013, said DTZ Southeast Asia in a report.
Notably, average monthly rents in Marina Bay dropped 5.5 percent quarter-on-quarter to S$13.00 per sq ft, while rents in Raffles Place slipped 3.4 percent quarter-on-quarter to S$10.45 per sq ft per month. The city fringe, which includes Orchard Road, Anson Road and Beach Road, saw average rents fell 2.1 percent quarter-on-quarter to S$8.25 per sq ft per month.
DTZ attributed the fall in office rents to the downside risks posed by the external economic environment.
“The subdued global growth and China’s economic slowdown contributed to a less optimistic outlook for Singapore, with the Ministry of Trade and Industry (MTI) narrowing the GDP growth forecast for 2015 to be between 2.0 and 2.5 percent in August 2015,” it said.
“These in turn led to a slowdown in leasing activities, which was mainly supported by lease renewals and take-up of smaller space.”
Meanwhile, office occupancy within the CBD dipped 0.9 percentage-points quarter-on-quarter to 95.0 percent in Q3. Occupancy rates in Marina Bay and Shenton Way fell 1.1 percentage-points and 1.8 percentage-points to 94.1 percent and 94.3 percent respectively.
Raffles Place, on the other hand, saw occupancy rates increase to 96.7 percent in Q3, on the back of relatively healthy occupancy rates of newer developments like CapitaGreen.
Looking ahead, DTZ expects the large impending supply of office space to place greater downward pressure on rents in the CBD next year.
Notably, CBD will see around 2.6 million sq ft of office space enter the market in 2016 and about 1.1 million sq ft from 2017 to 2018.
“We anticipate office rents in the CBD to trend downwards, especially if the current global economy remains uncertain. After 2018, rents may stabilize as the supply should be absorbed,” said Dr Lee Nai Jia, Regional Head (SEA) of Research at DTZ.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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