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New demand for Singapore office space remained muted in the second quarter of the year, with few expansions and more modest space requirements from limited new entrants, as global economic concerns continue to dampen the republic’s business outlook, a recent report from CBRE revealed.
According to CBRE, islandwide net absorption stood at -74,741 sq ft in Q2 2016, or its fourth consecutive quarter of contraction.
However, CBRE said a significant increase in leasing activity was seen in the past quarter as bolstered by a ‘flight to quality’ movement as well as occupiers taking advantage of attractive terms on offer.
The deals were mainly focused on new projects. As such, CBRE noted that these may result to some secondary vacancies as the tenants involved in these deals are likely to relocate from older buildings.
Sectors which contributed to “occupier movement included the info-communications and technology, financial and professional services industries,” the property consultancy said.
With no new completions this quarter, CBRE said islandwide vacancy remained relatively stable, registering a marginal increase to 5.9 percent.
CBRE, however, expects vacancy levels to increase sharply in the next six to nine months with the completion of various new developments which collectively offer a significant amount of space available for lease.
With these imminent completions, property developers have been proactive in structuring pre-lease deals as the battle to secure tenants intensified.
“Rents continued to come under pressure. Grade A CBD Core rents declined for the fifth consecutive quarter, contracting 4.0 percent quarter-on-quarter.”
Moving forward, CBRE expects further rental decline as pipeline projects come on line.
“In particular, landlords of existing buildings that have hitherto enjoyed high occupancy levels will face greater challenges to retain tenants. Whilst rent levels agreed in the pre-lease deals referenced above look representative of the market trough, existing buildings will likely face further adjustments,” it said.
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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