Singapore’s office vacancy rates are expected to rise further across all grades and micro markets, with a peak expected in 2013, according to property consultant CB Richard Ellis (CBRE).
Island-wide vacancy in Singapore increased to 7.3 per cent in Q1 2012. Vacant stock island-wide totalled 3.8 million sf. In Core CBD, the vacancy rate grew to 9.30 per cent from 8.80 per cent in Q4 2011. Going forward, vacancy rates are expected to rise further across all grades and micro markets and CBRE expect vacancy to peak in 2013.
In the core central business district, which covers Raffles Place, Marina Centre, Shenton Way and Marina Bay, the vacancy rate increased to 9.3 per cent from 8.8 per cent the previous quarter.
Grade A rents in Singapore continued to decline in Q1 2012, falling by 3.6 per cent quarter-on-quarter to $10.60 psf/month. The key demand indicator, quarterly net absorption, recorded a positive 587,000 sf in Q1 2012, boosted by the high 70 per cent pre-commitment level at Marina Bay Financial Centre (MBFC) Tower 3, which came on line in March.
Moray Armstrong, CBRE’s Executive Director of Office Services, said: “We are seeing strong leasing interest from the energy/commodities, professional and legal sectors. Whilst rents are expected to trend slightly downwards, we do not foresee a significant rental correction as compared to previous cycles.
“Our medium to long-term outlook is that Singapore is ideally placed to capitalise on the shift of economic power to Asia. The lower office cost base that will emerge from this cycle is likely to further improve Singapore’s competitive edge.”
In Asia Pacific, overall office occupancy declined in the first quarter of 2012. But this trend is likely to end in the second quarter, due to slowing occupier demand and oncoming supply all across the region.
8.3 million square feet of new office stock was completed across the Asia Pacific in the first quarter, 33 per cent above the 10 year quarterly average. Completions are expected to exceed 45 million square feet in 2012, a 30 per cent jump year-on-year. This is likely to result in a supply overhang which might push selected projects to 2013.
Dr Nick Axford, Executive Director and Head of CBRE Research (Asia Pacific), said: “A combination of weakening demand and limited availability of development finance is slowing the pace of construction activity.
“Nevertheless, considerable new supply will still hit the market in 2012, which means newer and better quality products for those occupiers looking to secure alternative space this year.”