Rentals of office space in the central region of Singapore eased 3.2 per cent in the fourth quarter of 2019 over the previous three months – a bigger drop compared with the 0.6 per cent fall in the third quarter of 2019, figures released by the Urban Redevelopment Authority (URA) showed on Thursday.
For the whole of 2019, the rental index slipped 3.1 per cent – contrasting with the increase of 7.4 per cent in 2018.
URA’s fourth quarter data also showed prices of office space in the central region contracted by 0.5 per cent, following a 3.9 per cent drop in the previous quarter. The price index shed 0.6 per cent for the whole of 2019, contrasting with the gain of 5.7 per cent in 2018.
Islandwide, as at the end of the fourth quarter of 2019, there was a total supply of about 753,000 square metres (sq m) gross floor area of office space in the pipeline, slightly more than the 738,000 sq m at the end of the previous quarter.
The amount of occupied office space increased by 30,000 sq m in net lettable area (NLA) in the fourth quarter, compared with the rise of 71,000 sq m in the previous quarter. The stock of office space expanded by 29,000 sq m in NLA in the fourth quarter, compared with the contraction of 4,000 sq m in the previous quarter.
As a result, the islandwide vacancy rate of office space dipped to 10.5 per cent as at the end of Q4 2019 from 10.6 per cent as at the end of the previous quarter.
The Q4 2019 drop in URA’s office rental index for the central region was the biggest quarter-on-quarter decline since Q1 2017, which signals that the office rental cycle could have peaked, according to Cushman & Wakefield’s head of research for Singapore and South-east Asia, Christine Li.
“Weaker business sentiments and growth prospects persist against the backdrop of multiple economic headwinds in the macro-environment,” she added.
Despite the lower market confidence, Ms Li noted that the annual islandwide net absorption of office space still outperformed, resulting in a drop in the vacancy rate from 12.1 per cent as at the end of 2018 to 10.5 per cent at the end of 2019. Total net absorption for the year amounted to 1.67 million sq ft, outweighing total annual net supply of 279,861 sq ft.