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Singapore’s commercial property segments recorded a diverse set of results during the first quarter of the year, according to a report from CBRE.
For instance, monthly rents of Grade A office space rose 1.8 percent to S$11.40 per sq ft in Q1 2015, while island-wide vacancy rate edged up by 0.2 percent to 4.9 percent.
The consultancy said that office leasing activity during the period was spurred by upgrading or relocation to spaces with cheaper rent rather than expansion.
“Going forward, CBRE Research anticipates that rental growth may have run its course and is likely to remain fairly flat. Tenant retention is expected to be given higher priority by landlords given the spectre of future competition from new development options towards the end of 2016.”
Meanwhile, monthly rents of prime retail space in the Orchard Road submarket dipped by 1.8 percent to S$34.05 per sq ft during the period under review, while those in the suburban submarket remained resilient at S$30.30 per sq ft.
The downward pressure on prime retail rents is attributed to lower sales, shortage in manpower and the expected drop in tourist arrivals.
“With tenant retention becoming an increasing focus of landlords, rents are mostly likely pressed to tumble further through 2015 to mid-2016 for most submarkets,” CBRE predicted.
In the business park scene, monthly rents were unchanged at S$5.50 per square foot as landlords continued to focus on raising occupancy rates.
“The signs have been encouraging for the early part of 2015 and this could bode well for the business parks market for the rest of the year. Assuming demand remains stable, the limited new speculative supply for 2015 should see vacancy rates continue to head downwards.”
But for this positive outlook to pan out, CBRE said the strong leasing demand from tech companies should continue as it has in the past 12 months, while the current pre-commitment level of 11 percent for 2016’s upcoming supply of 1.75 million square feet should improve further.
Meanwhile, in the industrial space market, rents remained flat as landlords are becoming more open to negotiations and willing to exercise greater flexibility on rental arrangements.
However, the challenging times for this sector are expected to continue based on early readings of key barometers. For example, manufacturing activity as gauged by PMI had shrank for four straight months, while non-oil domestic exports (NODX) declined by 9.7 percent year-on-year in February.
As for Singapore’s property investment sales, transaction volume rose 19.4 percent to S$3.348 billion in Q1 2015 on a quarterly basis.
Of this amount, 70.4 percent or S$2.358 billion came from the public sector. Of the 34 deals from this segment, 31 were priced below S$100 million, two were between S$100 million to S$300 million.
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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