Rents might dip by as much as 20%.
The time when office rents in Singapore grew at a dizzyingly brisk pace is now in the past. With a record number of prime office completions slated in 2016, CIMB warns that rents will just get cheaper and cheaper in Singapore’s Central Business District.
CIMB said that rents are expected to drop by 15% to 20% from 2016 to 2017, on back of large completions and reduced tenant interest.
“Following strong growth in the office rents over the past three years, rents have started to contract since the beginning of 2015, as landlords rush to secure their tenancies ahead of increased competition from the wave of incoming supply in 2016-17 as well as reduced appetite as a result of the slower pace of economic activities,” CIMB said.
CIMB also raised the alarm over low pre-commitment levels for new completions. Major new buildings that are due for completion this and early next year such as Marina One have not yet announced any anchor tenant precommitments.
Another building, DUO, has so far only tied up Abbott Laboratories, who will take up 100,000sf of space or roughly 18% of the property. Meanwhile, Guocoland’s Tanjong Pagar Centre, scheduled for completion in the third quarter, has so far secured tenants for 10% of its space.
“The key drag on outlook is the low pre-commitment levels, which has elevated uncertainty over how low would the floor in rents be. As such, the skewed supply will be a drag on rental outlook over the next couple of years,” CIMB noted.
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