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Prime office rents in Singapore are expected to drop by 14 percent from the fourth quarter of 2015 to the fourth quarter of 2019, said Knight Frank in its Global Cities 2017 report.
This is weakest growth forecast in the basket of surveyed markets in Asia Pacific.
The city-state saw prime office rent fall for six consecutive quarters to Q3 2016, which analysts attribute to the economic headwinds and cautious business sentiment in the Singapore market.
“The high influx of about six million sq ft GFA of office spaces island-wide for 2016 and 2017 are envisaged to weigh on rentals in the short term,” said Knight Frank Singapore Director and Head of Consultancy & Research, Alice Tan.
Nonetheless, the medium term prospect of Singapore’s office market is expected to “improve beyond 2018 as new supply tapers off substantially and demand potentially supported by Singapore’s rising status as a key global financial and business hub.”
Meanwhile, the report noted that three of the five costliest cities in the world to own prime office space are in Asia Pacific.
Hong Kong boasts the highest capital values for prime central office space, Tokyo followed in second place, while Singapore settled in the fifth spot.
“The flurry of big-ticket transactions made by foreign investors (the sale of trophy office asset Asia Square Tower 1 and Straits Trading Building) testifies to Singapore’s appeal in office asset ownership and confidence in the Singapore’s long-term stability,” said Knight Frank Singapore Executive Director and Head of Investment and Capital Markets, Ian Loh.
“Long-term capital preservation and appreciation would be the main selling point for Singapore’s office assets.”
Knight Frank’s Skyscraper Index, which examines the rental performance of commercial buildings over 30 storeys in the six months to Q2 2016, showed that Asia Pacific cities witnessed the highest rental growth across the 23 global cities it tracked.
“At the mid-point of the 2016, the global skyscraper story really has an Asia-Pacific flavour, with the top four performing cities in terms of rental growth situated in this region,” said Nicholas Holt, Head of Research, Asia Pacific, Knight Frank Asia Pacific.
Shanghai skyscrapers registered the strongest rental growth in 1H 2016 at 7.6 percent, followed by Sydney (6.5 percent), Hong Kong (5.9 percent) and Taipei (5.7 percent).
Singapore was listed at the bottom of the chart with a decline of seven percent due to a slowdown in the local economy and significant upcoming new supply.
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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