Commercial property rents, values seen falling further

EVEN as tenant demand for commercial property has fallen at its fastest pace in Q1 this year since the depths of the financial crisis in 2009, the Royal Institution of Chartered Surveyors (RICS) is anticipating a further drop in capital values and rents over the coming year. On the occupier market front, demand fell last quarter across all sectors even as available space continued to rise. About 64 per cent of surveyors expect rents to fall further over in the next quarter, and 65 per cent expect the downward trend to continue into next year. At the 12-month horizon, respondents expect rental values to fall by 5.8 per cent, with all sectors forecast to see a substantial decline.

In response, developers are putting the brakes on development projects, particularly for retail and industrial properties. In the office sector, only 20 per cent of respondents reported an increase in project starts.

Meanwhile, chartered surveyors recorded a fall in investment enquiries from foreign buyers across all types of commercial properties for the third consecutive quarter. Some 47 per cent of respondents said they believe credit conditions have tightened further compared to the last quarter.

The outlook for the office market remains bleak. Respondents reported a sharp increase in supply coming on to the market. Across all sectors, capital values are expected to deteriorate further compared to the previous quarter, with respondents predicting a 2.7 per cent decline over the next 12 months compared to 1.6 per cent the previous quarter.

The office sector is expected to underperform all others and RICS lead indicators suggest the price falls will accelerate in the coming quarters.

RICS Asean director Dexter See said: "The softening Singapore commercial market reflects, in part, some of the ongoing macroeconomic challenges facing the country and the wider Asia-Pacific region.

"In the immediate future, Singapore property professionals remain pessimistic about the market rebounding. Ongoing cooling measures, compounded with rising interest rates, suggest that improvements, if any, are likely to be both slow and small."

That being said, the medium-term outlook is slightly more optimistic. Respondents to the survey expect modest capital value growth over the next three years at a rate of 0.6 per cent per annum.

Source: Business Times, 4 May 2016