Commercial landlords, especially those leasing out office space, faced a tough first quarter as rents kept tumbling - though it was good news for their tenants.
New rental data puts the commercial property sector at odds with Singapore's wider economic outlook, which has enjoyed an uptick as a result of the brighter global outlook.
Urban Redevelopment Authority (URA) data showed that office rents fell 3.4 per cent in the three months to March 31, from the fourth quarter of last year, marking the eighth straight quarter of decline.
Retail rents fell for the ninth straight quarter by 2.9 per cent, much steeper than the preceding two quarters when rents fell 1.5 per cent.
The disappointing commercial property performance contrasted with the 2.5 per cent expansion of Singapore's economy in the three months to March 31 - boosted by a resurgent showing in manufacturing and other trade-dependent sectors.
"The dust has not settled," warned Ms Christine Li, research director at Cushman & Wakefield, noting that overall office demand has weakened.
Key sectors such as financial services, oil and gas are underperforming, while more corporates are adopting workplace strategies such as co-working without increasing real estate needs, she said.
While new properties such as the upcoming Marina One won fairly high pre-commitments for leases, older office spaces dragged down rentals and prices.
Prices of office space fell by 4 per cent in the first quarter - markedly worse than the 0.6 per cent decline in the previous quarter.
"There is a structural shift in the office rental market," said Ms Li, noting that the premium buildings in the heart of the Central Business District (CBD) have been well received, but landlords of older buildings have come under "immense pressure".
"They had to drop rents more aggressively in order to source for tenants to backfill space vacated by companies relocating to the new projects," she said.
Ms Tricia Song, head of research at Colliers International, Singapore, highlighted the large incoming supply of new office spaces, such as GSH Plaza and Guoco Tower.
"The last time the precinct saw such a huge influx of new supply was in the second quarter of 2011 when there was new supply of 1.3 million sq ft from Ocean Financial Centre and Asia Square Tower 1."
But Ms Li said that despite the larger office rent slide, there are signs economic growth will improve rents.
"With landlords of newly completed CBD projects already starting to raise their asking rents, Grade A CBD rents are expected to reach their inflexion point by end of 2017 and return to growth in 2018," she said, although outside of the CBD, office rents will continue to decline.
Mr Desmond Sim, head of CBRE Research for Singapore and South-east Asia, said the 9.2 per cent fall in retail rents year on year was the largest year-on-year fall since 2011, when URA started tracking retail space data including food and beverage, fitness and entertainment businesses.
Analysts attributed this to the challenging retail environment, with increased labour costs and regional competition.
Mr Sim said the first quarter "tends to be a quiet period for leasing as most retailers would have tried to expand before the year end to take advantage of the festive period".
"Even as demand is subdued, another 1.15 million sq ft of retail space will come in for the rest of this year," he said, adding that rising vacancy rates will put pressure on rents.