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Rental demand for commercial property in Singapore has declined at its fastest pace in Q1 2016 since the financial crisis in 2009, according to the latest report from the Royal Institution of Chartered Surveyors (RICS).
Amidst the city-state’s sluggish economy and growing supply of available space, the appetite for retail, industrial and office premises fell sharply last quarter for both tenants and investors.
Consequently, many market players surveyed by RICS believe that rents and capital values would continue to decline during the year. In fact, 64 percent of its respondents expect rents to drop further in the next quarter while 65 percent believe that the downtrend would extend into 2017.
Over the next 12 months, rental prices are forecasted to contract by 5.8 percent, with all sectors likely witnessing a significant decline.
Due to the bleak outlook, developers have temporarily stopped the launch of new commercial projects, especially those involving retail and industrial properties. Also, only 20 percent started the construction of more office developments.
Meanwhile, those polled witnessed a drop in investment enquiries from foreign buyers for all types of commercial properties for the third consecutive quarter.
Across all sectors, capital values are projected to weaken further on a quarterly basis, with respondents forecasting a 2.7 percent fall over the next 12 months.
“The office sector is expected to underperform all others and RICS lead indicators suggest the price falls will accelerate in the coming quarters,” it said.
Despite the dismal projection for Singapore’s commercial property market for 2017, the medium-term outlook is slightly more optimistic, with respondents anticipating a capital value growth of 0.6 percent per annum over the next three years.
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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