SINGAPORE, Jan. 19, 2016 – DTZ reported that average monthly gross office rents in the CBD continued to fall by 2.7% q-o-q to $10.15 per sq ft in Q4 2015, as slower global economic growth and heightened uncertainty continued to exert greater pressure on rents. This was the second consecutive q-o-q fall in rents, bringing about a 5.1% decrease for the whole of 2015. On a yearly basis, this was the first decline since 2012. The office sector in 2015 was a tale of two halves. Office rents in the CBD peaked $10.85 per sq ft per month in Q1 2015 after increasing for 8 consecutive quarters since Q1 2013. The rents were supported by strong demand from insurance and telecommunication, media and technology sectors, serviced offices and limited new office supply. In addition, tenants moving into CapitaGreen brought the net demand for office space in the CBD to 496,000 sq ft in 1H 2015. Major movers included Border & Cie, Jardine Lloyd Thompson, Mitsubishi Estate Asia and Jones Day.
In 2H 2015, a slowing Chinese economy and weaker business sentiments resulted in a contraction of net demand for office space in the CBD to -39,000 sq ft. Additionally, the amount of shadow space in the area also increased to 122,000 sq ft in Q4 2015 from 42,000 sq ft in Q2 2015. This emanated from pockets of space which were generally less than 10,000 sq ft. Coupled with the pressure from the estimated 2.4 million sq ft of expected office completions in the CBD in 2016, rents in the CBD fell to $10.15 per sq ft per month at the end of 2H 2015.
Within the CBD, monthly gross rents in Marina Bay fell the most on a year-on-year (y-o-y) basis by 5.7% to $12.50 per sq ft in Q4 2015. Due to a lower base, rents in Shenton Way/Robinson Road/ Cecil Street ($7.60 per sq ft per month in Q4) and Raffles Place ($10.30 per sq ft per month in Q4) contracted less by 5.0% and 4.8% y-o-y respectively. Likewise, rents of offices in decentralized areas, which comprised the Alexandra and Novena Belts, Tampines Finance Park, and Harbourfront, also saw a y-o-y decline of 6% to $7.00 per sq ft per month.
Ms Cheng Siow Ying, DTZ Executive Director of Business Space, noted: “As the global economy becomes more uncertain, tenants continue to exercise prudence in space take-up thereby prolonging the decision making process and consequently the slower pace of market activities. Notwithstanding, companies are also seeing the window of opportunity to review their immediate and future needs, be it co-location or relocation to better quality premises given the large availability of Grade A options from Q2 2016.”
Dr Lee Nai Jia, Regional Head (SEA) of Research at DTZ, added: “The further devaluation of the yuan and lower oil prices in the past few weeks are expected to impact business sentiments and curtail demand for office space, worsening the excess supply situation in 2016. Moving forward, office rents in the CBD are expected to slide further in 2016, particularly in 2H 2016 when landmark developments such as Guoco Tower, Marina One and Duo Tower are scheduled to complete.”
Source: DTZ Singapore, 25 Jan 2016