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Singapore saw office rents within the Central Business District (CBD) ease 1.2 percent to $8.90 psf per month in the first quarter of 2017, an improvement from the 2.1 percent drop registered in the previous quarter, revealed a report from Edmund Tie & Co.
The property consultancy noted that while the uncertain external environment “continued to exert pressure on rents, higher pre-commitment levels at upcoming completions and the filling up of newer buildings helped support rent levels”.
In Q1 2017, office rents in Marina Bay slipped 0.5 percent, compared to the two percent fall seen in Q4 2016.
This comes as occupancy rates within the area rose from 94.6 percent in Q4 2016 to 96.8 percent in Q1 2017. With this, the amount of shadow space in Marina Bay fell from almost 150,000 sq ft to 45,650 sq ft.
Monthly rents of Grade B offices at Shenton Way / Robinson Road / Cecil Street / Anson Road / Tanjong Pagar, however, continued to drop 1.9 percent to around $6.35 psf per month. And while the occupancy rate there improved 0.3 percentage points, it was still the lowest among the CBD subzones.
Edmund Tie & Co. expects rents of older developments to come under great pressure as almost 2.6 million sq ft of office space are expected to be completed in the CBD this year.
“While there is a pick-up in leasing activity, most prospective firms are seeking smaller or same spaces than what they are occupying before. Additionally, many small and medium-sized enterprises are moving to higher quality buildings while reducing their physical footprint by adopting an open office concept,” noted the report.
Looking ahead, the consultancy expects the flight to quality with a reduced physical foot print to persist, with Grade B rents in the Shenton Way / Robinson Road / Cecil Street / Anson Road / Tanjong Pagar subzone easing further by another three to eight percent till end-2017.
The pressure of office rents within the CBD due to the pipeline supply is also expected to moderate in 2018 and 2019.
Pipeline office supply in the CBD in 2018 stands at around 807,500 sq ft of net lettable area, while there is none in 2019.
“Barring any economic shocks, the lack of completions in 2019 provides a respite and allows the market to absorb the completions in 2017 and 2018,” the report said.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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