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Average monthly gross office rents in the Central Business District (CBD) dropped 2.7 percent quarter-on-quarter to S$10.15 per sq ft in Q4 2015, or its second consecutive quarterly decline, according to DTZ.
For the whole of 2015, rents fell 5.1 percent, making it the first year-on-year drop since 2012.
The decline in rents came as heightened uncertainty and slower global economic growth placed greater pressure on rents, said DTZ.
Office rents in the CBD peaked at S$10.85 per sq ft per month in Q1 2015, on the back of “strong demand coming from insurance and telecommunication, media and technology sectors, serviced offices and limited new office supply,” said the property consultancy.
However, net demand for office space contracted to -39,000 sq ft in the first half of 2015 amid weaker business sentiments and a slowing Chinese economy. And with around 2.4 million sq ft of office space expected to enter the market in 2016, rents in the CBD dipped to S$10.15 per sq ft per month by end of the second half of the year.
“As the global economy becomes more uncertain, tenants continue to exercise prudence in space take-up thereby prolonging the decision making process and consequently the slower pace of market activities,” said DTZ Executive Director of Business Space Cheng Siow Ying.
On a yearly basis, monthly gross rents in Marina Bay fell the most at 5.7 percent to S$12.50 per sq ft in Q4 2015.
Rents in Shenton Way/Robinson Road/ Cecil Street dropped by five percent to S$7.60 per sq ft per month, while Raffles Place saw rents slid by 4.8 percent to S$10.30 per sq ft per month.
Over at decentralised areas, comprising Alexandra and Novena Belts, Harbourfront and Tampines Finance Park, rents fell by six percent year-on-year to S$7.00 per sq ft per month.
“Moving forward, office rents in the CBD are expected to slide further in 2016, particularly in 2H 2016 when landmark developments such as Guoco Tower, Marina One and Duo Tower are scheduled to complete,” said Dr Lee Nai Jia, Regional Head (SEA) of Research at DTZ.
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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