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With market sentiment slowing down by year-end of last year, office occupiers are expected to remain cautious in the short term, with current expectations for leasing volumes over 2016 to be slightly lower than 2015, said Colliers International in a report.
Annual take-up rate for Premium Grade and Grade A in the CBD amounted to 860,462 sq ft in 2015, up three percent on 2014 but 31.2 percent down the five-year annual average of 1.25 million sq ft.
In terms of net new office supply, the five-year average from years 2010 to 2014 for Premium Grade and Grade A office in the CBD stood at 1.1 million sq ft (2010 to 2014 inclusive).
While last year’s net new supply of Premium Grade and Grade A in the CBD was way below the five-year average at 528,000 sq ft, it helped vacancy rates hold steady.
“Due to the limited amount of Premium and Grade A office space in 2015, some savvy tenants have started investigating their options of relocating to better quality buildings or in more attractive areas to benefit from savings in operational costs and more favourable contractual terms,” said Colliers International.
Meanwhile, rents across all sub-markets came under downward pressure in Q4 2015 while occupier demand became more selective.
In the Raffles Place/New Downtown submarket, average monthly gross rents for Premium Grade office dipped 3.5 percent quarter-on-quarter to S$11.27 per sq ft in Q4 2015, while rent for Grade A office space dropped 3.2 percent quarter-on-quarter to S$9.85 per sq ft.
The Shenton Way/Tanjong Pagar micro-market saw average monthly gross rents for Grade A office space fell 3.4 percent to S$8.55 per sq ft.
With this, Colliers expects rental levels to continue on a downward trend throughout 2016, potentially moving off eight percent to 10 percent across the market.
“Given that the next few months will be crucial for many preleases, Colliers expects occupancy levels in the office sector are likely to remain relatively stable until the scheduled new developments come onto the market during the second half of 2016,” it said.
“There will be a sizeable amount of Premium Grade and Grade A office supply scheduled for completion in the CBD, with approximately 3.58 million sq ft. These will include Marina One (1.88 million sq ft), Guoco Tower (850,000 sq ft), Duo Tower (570,000 sq ft) and 5 Shenton Way (280,000 sq ft).”
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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