According to DTZ Southeast Asia, average monthly gross rents in the Central Business District (CBD) slipped 4.1% q-o-q to $10.40 psf per month (psf pm) in 3Q2015, ending the uptrend since 2013. Rents in Raffles Place dipped 3.4% to $10.45 psf pm while rents in Marina Bay fell more sharply by 5.5% to $13.00 psf pm. Rents in the city fringe, which includes Beach Road, Anson Road and Orchard Road dipped by a smaller 2.1% to $8.25 psf pm.

Subdued global growth and China’s economic slowdown led to a less optimistic outlook for Singapore. Leasing activity, which slowed correspondingly, largely comprised lease renewals and take-up of smaller space. “Leasing incentives have increased as landlords compete to retain and attract tenants to sustain or improve space take-up,” says DTZ executive director of business space Cheng Siow Ying.

Office occupancy in the CBD slipped 0.9 percentage points (pp) q-o-q to 95.0% in 3Q2015, with occupancy falling 1.8 pp to 94.3% in Shenton Way and 1.1 pp to 94.1% in Marina Bay. The relatively healthy occupancy rates of newer developments, such as CapitaGreen, supported a slight increase in occupancy in Raffles Place from 96.3% in 2Q2015 to 96.7% in 3Q2015.

The 2.6 million sq ft of office space expected to be completed in the CBD next year, along with the 1.5 million sq ft in the city fringe, is expected to put more pressure on rents. Another 1.1 million sq ft of space is expected to be completed in the CBD from 2017 to 2018.

“We anticipate office rents in the CBD to trend downwards, especially if the current global economy remains uncertain,” says DTZ regional head (SEA) of research Dr Lee Nai Jia. “After 2018, rents may stabilise as the supply should be absorbed.”

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