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Monthly gross office rents in Singapore’s central business district (CBD) dropped by 3.9 percent quarter-on-quarter to S$9.9 per sq ft in Q1 2016 — its third straight quarter of decline, a report from DTZ revealed.
Among the CBD submarkets, monthly gross rents of Grade A offices in Raffles Place remained the most resilient, with a 2.3 percent quarterly dip to S$10.50 per sq ft. The rents there were supported by the high occupancy rate, which edged up by 0.4 percentage points to 97.4 percent. Moreover, the lack of a sizeable upcoming supply lessened the downward pressure on rents, the property consultancy said.
On the other hand, Marina Bay reported the largest rental contraction of 5 percent to $11.90 per sq ft per month, as occupancy rate in the area slid from to 93.9 percent from 94.3 percent in the previous quarter due to the relocation of tenants from Marina Bay and the upcoming completion of 1.9 million sq ft of office space at Marina One.
Meanwhile, rents of Grade B office space in the Shenton Way/Robinson Road/Cecil Street/Anson Road/Tanjong Pagar subzone shrank by 4.0 percent on quarter to S$7.30 per sq ft in Q1 2016 as landlords were more flexible in controlling the exodus of occupiers to better alternatives amidst a sluggish market.
“Moving forward, office rents are expected to decrease further in subsequent quarters due to pressures from a further decline in demand and the large pending supply,” said the property consultancy.
On the supply side, around 3.1 million sq ft of office space are projected to be ready in the CBD by 2016 and 2017. Based on the annual average net absorption rate from 2006 to 2015, it is estimated to take about four years before the office market can take-up the large pipeline.
“To compound the problem, the current shadow space of 158,000 sq ft and future shadow space of 249,000 sq ft in the CBD will exert additional downward pressure on office rents upon lease expiry for such spaces,” added 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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