Singapore Q3 office rents in CBD suffer 1st decline since 2013: DTZ

The Marina Bay Financial Centre in the Singapore Central Business District.
The Marina Bay Financial Centre in the Singapore Central Business District.ST PHOTO: KUA CHEE SIONG

SINGAPORE - Office rents in the Central Business District (CBD) fell in the third quarter, the first decline from a general uptrend since 2013, according to a DTZ report out on Monday (Oct 5).

Average monthly gross rents in the CBD fell by 4.1 per cent from the second quarter to $10.40 per sq ft, said DTZ.

Average monthly gross rents in Marina Bay fell by 5.5 per cent from the second quarter to $13.00 per sq ft, and rents in Raffles Place decreased 3.4 per cent to $10.45 per sq ft per month, it found.

Likewise, average office rents in the city fringe, which includes Beach Road, Anson Road and Orchard Road, declined by 2.1 per cent to $8.25 per sq ft per month.

The fall in office rents in the quarter was largely due to the subdued economic environment, said DTZ.

A less optimistic outlook for Singapore led to a slowdown in leasing activities, which was mainly supported by lease renewals and take-up of smaller space.

"Leasing incentives have increased as landlords compete to retain and attract tenants to sustain or improve space take-up," said Ms Cheng Siow Ying, DTZ executive director of business space. "These leasing incentives can be in the form of longer fitting out periods, rent holidays or rental rebates, which will yield lower net effective rents for the occupiers."

Office occupancy in the CBD declined 0.9 percentage-points from the second quarter to 95.0 per cent in the third quarter.

Both Shenton Way and Marina Bay registered quarter on quarter decrease on occupancy rate, while Raffles Place was the sole bright spot as it saw its occupancy inching up 0.4 percentage points to 96.7 per cent.

"The slight increase in occupancy in Raffles Place was supported by the relatively healthy occupancy rates of newer developments such as CapitaGreen, which attained an occupancy rate of 83 per cent," said DTZ.

The large impending supply of office space is expected to place greater downward pressure on rents in the CBD next year, it added.

About 2.6 million sq ft of office space will come on board next year in the CBD, of which 1.9 million sq ft emanates from Marina One.

Additionally, offices in the CBD will face greater competition after the completion of DUO Tower and Guoco Tower in the same year, which will yield around 1.5 million sq ft of space in the CBD fringe.

From 2017 to 2018, about 1.1 million sq ft of office space in the CBD will be expected to complete, including SBF Center and Frasers Tower.

"We anticipate office rents in the CBD to trend downwards, especially if the current global economy remains uncertain. After 2018, rents may stabilise as the supply should be absorbed," said Dr Lee Nai Jia, regional head (SEA) of research at DTZ.

"As of now, the average pipeline supply in the CBD from 2016 to 2019 is still less than the average annual demand in the same area from 2011 to 2014."

A land parcel at Central Boulevard, newly added into the reserve list of the Government Land Sales (GLS) programme for the second half, may also be triggered, he noted.

The site is across the road from the Downtown MRT station, the Lau Pa Sat food centre, One Raffles Quay and Asia Square. It is zoned "White", meaning multiple uses are allowed, and has a potential gross floor area of about 1.6 million sq ft.

wrennie@sph.com.sg