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The vacancy rate in Singapore’s office real estate market is forecasted to rise further and could reach its highest level in more than ten years, revealed a Reuters report citing market experts.
Empty premises are expected to abound as major office tenants are expected to downsize or make do with their existing space in light of the lacklustre local economy and lower exports to China and other key global markets. In 2015, the city-state’s GDP increased by two percent—its weakest annual growth since 2009.
According to SLP International’s Executive Director Nicholas Mak, many of the recently completed office buildings in Singapore were planned about five years ago after the 2008 global downturn.
“Many people thought that this is the new boom, let’s try to capitalise on it. Nobody expected the party to end by end of 2015,” he said, adding that office vacancy rates could reach 13.5 percent or the lowest level since 2005.
Amidst the challenging market conditions, tenants that typically lease a significant amount of office premises could slash their space requirements. These include financial institutions, oil and gas firms and companies engaged in commodities trading.
Moreover, a January report by JLL revealed that 50 percent of major foreign international banks in Singapore’s central business district reduced their office space in the past year and a half, or struggled with the added cost of their extra space.
The consultancy also forecasted that prime office rents in the city-state could fall between 10 percent and 20 percent, following a 15 percent drop in 2015.
In spite of the gloomy office market, Mak thinks the vacancy rate could fall by end-2016 if Singapore’s economy gains momentum. With rosier market conditions, businesses may take-up more space and ease the glut.
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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