SINGAPORE - Office rents in the Central Business District saw no respite, declining for the third consecutive quarter, according to a DTZ report out on Thursday (April 7).
In the first quarter of 2016, average monthly gross rents fell by 3.9 per cent from the last quarter to S$9.90 per sq ft, said DTZ Southeast Asia.
Rents declined the most in Marina Bay, falling by 5.0 per cent to S$11.90 per sq ft, with office occupancy easing from 94.3 per cent in the fourth quarter of 2015 to 93.9 per cent in the first quarter of 2016.
The steeper decline of rents in Marina Bay was attributed to more vacancies and new space in the area, with tenants moving out and the pending completion of 1.9 million sq ft of office space from Marina One, expected to be ready by the end of 2016 or early 2017.
Within the CBD, monthly gross rents of Grade A offices in Raffles Place remained the most resilient, with a 2.3 per cent fall to S$10.50 per sq ft in the first quarter. The office rents were supported by the high occupancy rate in Raffles Place, which rose by 0.4 percentage-points q-o-q to 97.4 per cent, said DTZ. The lack of notable pipeline supply also helped mitigate the downward pressure, it said.
The fall in office rents was largely due to concerns over a slowing global economy, said the real estate consultancy, noting the cutback in demand from banks and financial services firms hit by job cuts and downsizing.
Office rents are expected to decrease further due to anticipated decline in demand and the large pending supply, said DTZ.
"While the global economy shows signs of recovering, most firms are still cautious as the recovery may be temporary. Additionally, many sectors are adopting disruptive technologies to expand without increasing their footprints," said Dr Lee Nai Jia, Regional Head (SEA) of Research at DTZ.
There is a also glut of office space in the CBD, said DTZ, as 3.1 million sq ft of office space in the CBD will be completed in 2016 and 2017. This will take about four years for the market to absorb. But DTZ expects firms in insurance, technology, social media and serviced office providers to make up the bulk of demand for office space for the rest of the year.
Said Ms Cheng Siow Ying, DTZ executive director of business space: "More start-up companies will be formed as they leverage on the mobile and internet platform, and take advantage of government schemes and initiatives. These start-up companies prefer to locate in the CBD or established business clusters to attract and retain talent as well as to be close to their clients. Such co-working space becomes a viable option as it provides them flexibility in structuring service agreements attuned to their business needs."
With the increase in demand for co-working space, serviced office providers are expanding, said DTZ. One of them is homegrown company JustGroup, which launched JustCo, the largest co-working space in SINGAPORE, with 30,000 sq ft across four floors at 120 Robinson Road and a new location at 6 Raffles Quay.
Just Group also plans to double its size in the next two to three years.
Correction Note: This article has been edited for clarity.