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Singapore saw lacklustre demand for CBD office space in Q3 2015, as economic uncertainty and expectations for further rental declines affect leasing activity, said JLL in a report.
Despite the subdued demand, the report said there were still some companies that looked to leverage on Singapore’s position as a regional hub and set up new offices within the city during the period under review.
“These tenants were from a wide range of industries and included the South Korea National Pension Service, ZS Associates and ECommPay,” it said.
Tenants planning to relocate in Q3 2015 continued to show preference for deals that offered lower rents in higher quality buildings within Marina Centre and Raffles Place submarkets. JLL noted that these deals were particularly attractive to tenants coming from older buildings, usually in the Shenton Way submarket.
The report revealed that overall CBD vacancy rate slightly increased to 6.1 percent in Q3 2015. JLL expects vacancy to gradually increase over the next few quarters as select occupiers, mostly in the financial sector, give up space.
With most of this space large in size and much of the current demand is for smaller requirements, landlords may be forced to subdivide space in order to re-lease the vacated premises, it said.
Overall CBD rents fell 4.5 percent quarter-on-quarter to S$9.61 per sq ft per month in Q3 2015.
“Landlords continued to take pre-emptive steps to retain and attract occupiers ahead of a large wave of supply (107 million sq ft) due to be completed in 2016.”
With this, JLL expects rents across all submarkets to continue trending lower in the short term, while pre-leasing activity is expected to remain challenging as “existing occupiers are hesitant to sign new leases until shortly before the expiration of their existing contracts due to the expectation of further rental declines.”
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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