Outlook for office sector dim: analysts

Singapore’s retail and industrial property sectors are expected to continue to outperform the office market, which is feeling the impact of dampened demand from financial firms, analysts say.

Across the board, the pace of increase for rentals and prices in the three sectors declined in the fourth quarter of last year, data released by the Urban Redevelopment Authority (URA) showed yesterday. But the outlook for industrial and retail spaces is much better, according to experts.

Prices for industrial space rose by 4 per cent in the last three months of last year, compared with 6.9 per cent in the previous quarter, while rentals increased 0.4 per cent versus 2.4 per cent, according to URA data.

For retail shops, rental growth remained unchanged at 0.5 per cent in the fourth quarter from the previous three months, while prices rose 0.2 per cent compared with 3.4 per cent in the previous quarter.

“This is the sector with the least controversies and overhang,” property consultant Savills said. “Whilst some may fear an oversupply in the coming years … the demand for retail space still exceeds supply.”

The cooling trend was most evident in the office sector, where rentals increased by 0.3 per cent in the fourth quarter versus 0.9 per cent in the third, and prices rose 1 per cent versus 3.7 per cent previously.

“I expect office numbers to weaken, led by Grade A,” said Mr Colin Tan, research and consultancy head at Chesterton Suntec International. “Grade A depends on banks and financial institution, and the outlook for this industry has been, in a sense, depressed looking forward. So the demand from tenant group has shrunk.”

In contrast, the industrial sector is expected to fare better. “Industrials like marine and chemical industry are expanding this year. Therefore, we expect pricing at 5 per cent up, minimum, for the warehouse property sector,” said Ms Angela Lee, managing director at Lianco International Property.

Source : Today – 28 Jan 2012

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