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Both office and retail markets suffered further weakness if the first quarter of 2016, with both prices and rents maintaining the downward movement seen in the previous quarter.
Office prices decreased by 0.3 percent in Q1, following a 0.1 percent decline previously—bringing the total decline from its last peak in Q2 last year to 0.6 percent.
Meanwhile, office rents also fell further. Rents in Q1 contracted by 2.1 percent, following a 1.8 percent decline in the previous quarter. Office rents fell by a total of 9 percent in over four quarters since they last peaked in Q1 2015.
According to CBRE, the fall in office rents is a reflection of the weakness in the occupier market. “The rental index declined 2.1 percent, with caution around impending supply in the second half of 2016,” said Desmond Sim, Head, CBRE Research, Singapore and South East Asia.
Meanwhile, the amount of occupied office space increased by 1,000 sq m (nett) in 1st Quarter 2016, compared to the decrease of 10,000 sq m (nett) previously. The stock of office space declined by 23,000 sq m (nett) in Q1, compared to the decline of 21,000 sq m (nett) in the previous quarter. This resulted in the 9.2 percent decline in the island-wide vacancy rate of office space which fell 9.5 percent at the end of Q4 2015.
“Vacancy [rates] has corrected marginally due to the lack of new supply. Vacancy fell 0.3 percent in response to waning demand over the last six months, but at a steady rate because of an absence of new supply. CBRE does not view the volume as a concern but the scheduling of the completion of supply which will complete in the next six months. At this point in the cycle, relocation is primarily being driven by “flight-to-quality” and efficiency gains rather than expansion,” Sim said.
Over at the retail market, prices decreased by 1.9 percent for the past three months, compared to just 0.1 percent decline in the previous quarter. The drop in prices is now at 2.8 percent below its last peak in Q1 2015.
Retail space rents, on the other hand, declined at a faster pace than previously, falling 1.9 percent in Q1 this year, compared to just 1.3 percent in Q4 2015. The fall in rents marked the sector’s fifth consecutive quarter decline, bringing the total decline from its last peak in Q4 2014 to 6.0 percent.
“The retail rental index declined for five consecutive quarters, on the back of labour constraints and weak retail performance, which has impacted retail space demand. This is exacerbated by the impending volume of supply,” Sim said, noting that the despite the current figures, Singapore remains attractive to new retailers “although they are opening fewer stores.“
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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