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Singapore’s real estate occupier market is expected to remain under pressure for the most part of 2016, due to a moderately growing economy along with imbalances in demand and supply, said CBRE Research in its latest report.
According to CBRE, the office market is expected to witness further ‘flight to value’ this year in view of the competitive rental market, saying that with a large pipeline of completions from 2H 2015 and the benign economy weighing on leasing demand, landlords will likely focus more on occupancy than on rental values.
CBRE noted that some occupiers have been holding off premises planning in anticipation of more favourable market conditions. It also noted that the completion of Marina One will likely see vacancy rate of Grade A CBD Core office market increase to around 14 percent in 2016.
But the market may find support sooner than expected by market players given the limited supply coming into the market after 2018, the property consultancy said as it “expects a possible market recovery to occur as soon as end-2018 especially when available space is expected to get tighter should demand remain constant.”
Meanwhile, the retail market is expected to swing in favour of the tenants this year, with around 2.11 million sq ft of supply set to enter the market in 2016.
“Rents are expected to face continued downward pressure in 2016 as the market remains in favour of the occupier,” the report said.
In 2015, average islandwide prime rent monitored by CBRE Research fell three percent year-on-year, primarily due to downward movements in the City Hall/Marina Centre and Orchard Road sub-markets.
According to the report, prime rents may recover from 2H 2017 on the back of a stabilised economic fundamentals and a temporary break in supply – no notable new shopping centre supply is set to enter the market until 2H 2018 onwards.
Over at the logistic front, the sector is expected to remain soft at least until manufacturing and trade fundamentals register more positive performances. It is noted that the GDP estimates showed that the manufacturing sector declined 4.8 percent on an annual basis for the whole of 2015.
CBRE revealed that cost containment will remain as the key theme for the sector as occupiers look to be space efficient in order to raise operating margins.
Nonetheless, the growth of emerging sectors like e-commerce and the need for more specialised logistics like wine storage and cold chain have helped to support demand.
Looking ahead, CBRE expects the logistic sector’s fundamentals to remain strong given the city-state’s standing as a global logistics hub.
“Landlords who are able to maintain strong occupancies and improve their portfolio and operational efficiency will be primed to take advantage when the market turns. Greater regional integration through the ASEAN Economic Community and Trans-Pacific Partnership will also be a boon for the logistics sector.”
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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