Tag Archives: Office Rental Market

Singapore office space demand could weaken: Analysts

The supply of new office space in the central business district (CBD) is likely to outstrip demand, giving tenants more options and forcing landlords to reduce rents amid global headwinds, according to analysts.

Property services firm Century 21 has said that Singapore, being such an open economy, will be hard hit by global economic conditions such as the slowdown in China and the turmoil in stock and commodity markets.

It added that there is eight million square feet of vacant office space in Singapore now.

One office building in the CBD, CapitaGreen, is currently 83 per cent occupied, below the average of around 95 per cent for most top grade office buildings there. The new 40-storey building, completed in December last year, is home to more than 30 multinational companies, including China Life, Lloyds Banking Group and Schroders.

The owners remain bullish about prospects.

“More than 50 per cent of the tenants have moved into CapitaGreen because they need more space, and that means growth for each of the companies,” said Ms Lynette Leong, CEO of CapitaLand Commercial Trust. “And 6 per cent of the building comprises tenants that are new to Singapore – they are brand new companies that are setting up offices in their companies for the first time. As a result of that we feel that there is still a very good vibrancy in the office market.”

The building is jointly developed by CapitaLand, CapitaLand Commercial Trust and Mitsubishi Estate Asia.

However, some analysts do not share the owners’ optimism. Property services firm Century 21 expects office rents to fall by 20 to 30 per cent in the next two years.

“We are seeing quite a lot of new supply coming on stream especially next year, and with the economy broadly heading into a lot of headwinds, as well as companies in oil and gas services sector, in the commodities sector announcing retrenchment or some companies even announcing pullouts from Singapore,” said Mr Ku Swee Yong, CEO of Century 21.

“Actually the demand for office space over the next 12 to 18 months should be pretty weak. I’m not expecting any significant net demand. Then the oncoming supply, especially in 2016, could exacerbate the current vacancy situation. So today’s vacancy rate is at about 10 per cent, with eight million square feet of vacant office space across the island … I think the crunch time will be next year when our vacancy rate will start to exceed the 12 per cent benchmark.”

Colliers International added the lack of new demand from banks is the main challenge facing landlords in the CBD. The other is the move by some companies to lower rents by shifting to outlying areas such as Jurong East, where new high-quality office space is available.

Source : Channel NewsAsia – 15 Sep 2015

Office rents to ease soon

With no new major buildings yet completed, supply of office space continues to be tight in the Central Business District (CBD).

In the wake of unceasing uncertainties in the wider economy and high office rentals, more companies are adopting a cautious business approach, gravitating towards cheaper premises like decentralised office buildings, industrial properties, business parks and disused State buildings.

Hence, average occupancy of office space across most areas had dipped slightly in the second quarter of this year. Islandwide average occupancy eased by0.2 percentage points from the previous quarter, to 96.9 per cent. Average occupancy ofoffice buildings in Raffles Place and Marina Centre dropped slightly due mainly to tenants moving out to cheaper locations after lease expiration.

At the same time, supported by comparatively lower rentals, decentralised areas like Novena and HarbourFront have enjoyed modest increases in occupancy.

Growth in office rentals have started to taper off after the meteoric rise last year,reflecting the increased resistance to higher rents.

Apart from Raffles Place, Shenton Way, Robinson Road, Cecil Street and decentralised areas, growth in office rentals in other areas like Marina Centre, Orchard Road, Anson Road and Tanjong Pagar were flat.

The Government’s efforts to create more immediate office space has also eased the supply crunch and pressure on rentals.

Apart from an estimated 1.9 million square feet of office space from transitional offices and disused State properties that were awarded between last year and the first six months of this year, occupiers can find more relief in the coming months.

Two disused State properties – the former Phoenix Park Complex and former Singapore Badminton Hall – were released for tender in thesecond quarter of this year. In addition, two more transitional office sites at Mohamed Sultan Road and Mountbatten Road will be released for tender under the Government Land SalesProgramme for the second half of this year.

Following an earlier announcement to relocate several Government agencies out of the CBD, other Government agencies in the city centre were tasked to streamline their office space utilisation and free up more office space to the private sector in the process.

The supply crunch in the CBD will be eased from 2010 with new office buildings being completed. Potential supply of office space from the second half of the year to 2013 is estimated to be 12.1 million sq ft.

With sufficient office space supply in the pipeline, the number of sites under the Government Land Sales Programme for the second half of the year has been reduced.

Only three commercial sites were added to the confirmed list while the reserve list includes three commercial sites and two white sites.

With the Urban Redevelopment Authority’s ban on the conversion of office buildings in the central area to be lifted at the end of next year, some projects in the pipeline may be delayed or aborted as developers review their plans in light of the huge potential supply and slowing economy.

Going forward, as companies and Government agencies start to move out of the CBD and more new supply comes on stream, office occupancy is likely to ease and limit rental growth in the city centre for the rest of the year.

The writer is senior director of research at DTZ. The opinions expressed are her own.

Source : Today – 14 Aug 2008