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Gross effective rents of Singapore office space fell by 5.2 percent in Q2 2015 compared to the previous quarter, according to the latest report from Jones Lang Lasalle (JLL).
The decline in rents is mainly attributed to the substantial upcoming supply, which is forcing landlords to reduce their asking prices, said the property consultancy. Nevertheless, monthly office rents edged up by 0.5 percent to S$10.1 per sq ft on an annual basis.
At the same time, the vacancy rate in the republic’s central business district (CBD) rose to 6.0 percent, while net office absorption there slumped to less than 25,000 sq m.
Meanwhile, net effective rents of office premises across the Asia Pacific (APAC) region, increased by 0.9 percent quarter-on-quarter, surpassing the 0.5 percent in Q1 2015.
The highest quarterly gain of 5.6 percent was recorded by Hong Kong, while Shanghai and the Tokyo CBD completed the top three, with rental growths of 3.0 percent and 2.4 percent respectively.
Moving forward, office rents in Singapore are forecasted to decline further in the next few quarters following the earlier-than-anticipated rental drop in Q2 2015, as landlords began slashing rents to maintain occupancy. Net absorption is predicted to fall by year-end as well.
“Capital values are expected to soften more moderately than rents in the near term as the outlook for interest rate hikes has become somewhat more muted due to weak US economic data in April/May,” noted JLL.
Nonetheless, office transaction activity in could be bolstered in 2H 2015 as several quality office properties are available on the market, including the CPF building, 158 Cecil Street and Asia Square Tower 1.
“These have garnered interest from institutional investors who are confident about the long-term fundamentals of the Singapore office market,” it added.
For the APAC region, overall leasing volumes could surge by 15 to 20 percent. However, rents and capital values are predicted to increase by up to 10 percent for most markets, with capital values continuing to outperform rents in most cases.
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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