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Despite the soft demand for office space from financial firms in Q2 2016, Japanese banks have been active in Singapore’s leasing market in recent months with several large rental transactions in the pipeline, according to CBRE’s latest report.
“Japanese banks have featured prominently in the leasing market in Singapore in recent months,” said CBRE managing director for Advisory & Transaction and Office Services, Moray Armstrong. For instance, Bank of Tokyo Mitsubishi pre-leased 140,000 sq ft of office space at Marina One (pictured).
But Japan-based firms are not the only ones expanding their real estate footprint. Financial institutions from China are showing interest in acquiring ownership positions in office properties in the city-state, with a few potential upcoming transactions, Armstrong added.
Meanwhile, western financial institutions have been downsizing for the past few years in Singapore. However, the pace of contraction appears to be slowing and there are signs that the sector may have found an appropriate support level.
In fact, the World Bank leased 50,000 sq ft of office space at Marina Bay Financial Centre Tower 2, while Citibank renewed its 48,500 sq ft lease at Capital Square in recent months.
According to the report, given that office rents in the CBD have fallen sharper than those in out of town areas and business parks, there has been a marked increase in leasing activity as tenants relocate to better quality buildings, or take advantage of more attractive rental terms.
“These opportunistic deals have primarily been focused on new projects, with a few large lease negotiations reported. However, the tenants involved are likely to relocate from older generation buildings, which will result in some secondary vacancy,” added CBRE.
Looking ahead, office rents in Singapore are expected to weaken further but the rate of decline would likely slow down. The trend of downsizing and relocating non-core functions by Western financial institutions is also forecasted to subside due to the currently lower office rents in the CBD.
Image source: M+S
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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