SINGAPORE - Tenant demand for commercial space fell at its fastest pace since the global financial crisis in 2009, as Singapore's economic growth continues to slow, said the Royal Institution of Chartered Surveyors (RICS) on Tuesday.
The sharp decline in occupier demand has taken its toll on investment activity as foreign buyers increasingly look beyond Singapore for better returns, said RICS in a survey report released on Tuesday (May 3).
According to its first quarter Global Cities Commercial Property Monitor, chartered surveyors anticipate a further drop in capital values and rents over the coming year against the weak economic outlook.
Demand from occupiers fell sharply last quarter across all sectors including retail, industrial and office, even as available space continued to rise.
"The increase slack in the market led landlords to increase rent-free periods on offer to tenants, in order to incentivise them to take leases", RICS said.
Over half of the surveyors expect rents to fall further over in the next quarter, and 65 per cent expect the downward trend to continue into next year.
RICS noted that respondents expect rental values to fall by 5.8 per cent, with all sectors forecast to see a substantial decline, over a twelve month horizon.
Developers, meanwhile, 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, RICS said.
For the third consecutive quarter, chartered surveyors recorded a fall in investment enquiries from foreign buyers across all types of commercial properties.
About 47 per cent of those polled believed credit conditions had tightened further compared to the last quarter.
The outlook for the office market remains bleak as new supply of space looms, RICS reported.
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.
"The office sector is expected to underperform all others and RICS lead indicators suggest the price falls will accelerate in the coming quarters", it added.
RICS Asean Director Dexter See said in the statement: "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."
Despite the immediate challenges in the commercial property market, 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.