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Rental growth of business parks and hi-tech parks in Singapore eased in the third quarter of the year as the weakening Chinese economy pulled down business confidence as well as demand for industrial space, a report by DTZ.
In Q3, average monthly gross rents of first storey and upper-storey conventional space fell 2.3 percent and 2.9 percent quarter-on-quarter to S$2.15 per sq ft and S$1.70 per sq ft respectively.
Meanwhile, average monthly gross rents for business parks and hi-tech sectors held firm quarter-on-quarter at S$5.10 per sq ft and S$3.30 per sq ft respectively.
According to DTZ, gross monthly rents for these two sectors had been on the uptrend during the last thirteen quarters by an average of 0.7 percent quarter-on-quarter for business parks and 0.8 percent quarter-on-quarter for hi-tech sectors. The recent decline was registered in Q2 2012, due to the Eurozone crisis.
“Leasing activities were slower, as many occupiers opted to renew their leases and/or seek expansion space within the existing building. Landlords were also proactive in offering competitive rents to retain their tenants,” said DTZ executive director of business space Cheng Siow Ying.
“The asset enhancement initiatives undertaken by some of the owners of the older developments also aided in persuading the tenants to stay put. Given the weaker macro environment and uncertain economic outlook, most tenants have adopted the wait-and-see approach and prefer not to incur the cost of moving and retrofitting.”
Looking ahead, DTZ expects rents for business parks to trend downwards from Q4 2015 to end-2016 as around 3.0 million sq ft of business park space are expected to be completed during the said period.
Of these, some 2.2 million sq ft of space is expected to be leased while single users will occupy the remaining space. Notable multiple-user projects include Ascent and Mapletree Business City II, which will yield about 407,000 sq ft and 1.1 million sq ft of net lettable area (NLA) respectively.
With this, Dr Lee Nai Jia, DTZ Regional Head (SEA) of Research, expects the current pipeline of business park developments to be more than sufficient to support the demand for the next two years.
“Hence, given the short-term oversupply, we do not expect rents to increase in 2016,” he said.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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