Slower decline in office and retail rents, prices in Q2

Office buildings outside Raffles Place MRT station.
Office buildings outside Raffles Place MRT station. PHOTO: ST FILE

SINGAPORE - Market conditions for retail and office spaces continued to be challenging, although declines in prices and rents appear to be easing.

According to the latest figures from the Urban Redevelopment Authority on Friday (July 28), overall office prices fell by 1.4 per cent in the second quarter, a slower decline compared with the 4 per cent dip in the previous quarter.

Office rents continued to fall by 1.1 per cent, following a decrease of 3.4 per cent in the previous quarter.

However, the stock of office space increased by 76,000 sq m in the second quarter, edging up the overall vacancy rate of office space to 12.4 per cent, up from 11.6 per cent in the first three months of this year.

While the figures paint an uncertain picture of the office property market, analysts have been optimistic about this property segment. A CBRE report noted that the "office market has likely reached the trough" after eight quarters of decline.

It noted that "average office rents stabilised in the second quarter" and that new office developments have been able to attract tenants.

The retail space continued to post sluggish numbers, albeit with easing declines.

Retail space values fell by 3.2 per cent in the second quarter, following a dip of 4 per cent in the first three months of the year.

Rental rates fell by 1.2 per cent, following 2.9 per cent in the previous quarter.

Islandwide vacancy rates of retail space rose to 8.1 per cent at the end of the second quarter, up from 7.7 per cent at the end of the first quarter.

CBRE noted that retail sales increased year-on-year from March to May, indicating that consumer sentiments are still "relatively healthy".

However, it said that "in the absence of clear demand drivers, rental outlook for the rest of the year and into 2018 is muted".