Office supply glut looms through 2021

Developers are seen offering 1m sqft office space annually.

The narrative of "lack of office supply beyond 2018" is turning into one of "a million sq. ft. well into 2021 barring 2019", said Krishna Guha, analyst at Jefferies.

Guha notes that notwithstanding the incoming supply of 5.6M sq. ft. in 2017 and 2018 – with some precommits: Guoco Tower 890K sq. ft. 75% pre commit, Marine One 1.9M sq. ft.. 40% precommit, Duo 570K sq. ft. 30% pre-commit, (pre-commits on Frasers Tower 645K sq. ft. and Paya Lebar Quarter 1M sq. ft. are not known) – and 1.6M sq. ft. in 2020, developers
are bidding for office land.

Jefferies channel checks suggest The Central Boulevard white site (potentially 1M sq. ft. of office space) got a bid 30% higher than reserve price of S$1.54B.

It adds that CCT recently announced redevelopment of Golden Shoe Car Park potentially resulting in 1M sq. ft. by 2021.

"It appears that supply is likely to continue even after 2018 well into 2021 except for a lean year in 2019," it said.

According to Guha, net annual office absorption has been ranging between 200K to 400K sq. ft. since 2014. So, it is quite likely that developers are factoring in demand revival to more normalized level of 1M sq. ft. annually.

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