October 10, 2012
Despite improving vacancies, prime office rents in Singapore are unlikely to recover in the near term, said Cushman & Wakefield.
The third quarter saw prime office rents continue their downward slide, despite improving vacancies. This indicated that the Singapore's office market is unlikely to see a recovery in the near term, said Cushman & Wakefield.
In Q3, Grade A vacancies fell 1.1 percentage points quarter-on-quarter, dropping to 6.8% from 7.9% in the second quarter. The Marina Bay sub-market saw the sharpest decline in vacancies, dropping 9.8% in Q3 from 12.8% in Q2. However, vacancies rose slightly in Orchard Road to 2% in Q3 from 1.5% in Q2, though the sub-market remains tight.
"Steady moderate leasing volume is encouraging news given the context of slower economic growth this year and continued volatility in the global environment," said Sigrid Zialcita, managing director for Cushman & Wakefield's research team in the Asia Pacific.
The improvements in vacancies failed to stop prime rents from dropping further in Q3. Overall, Grade A rent declined by 3.6% from the previous quarter to SGD 9.13 per sq ft.
The core CBD areas of Marina Bay and Raffles Place suffered the largest rental drops of 2.5% and 3.9% respectively. City Hall and Marina Centre fared slightly better, slipping by 1.8% in the third quarter after remaining flat in the previous quarter.
Although the office market continued to soften in Q3, a comparison of rental trends across all sub-markets indicated that the decline was at a more moderate pace than during the first six months of the year.
Analysts expect that a continued decline in vacancies over the next quarter would exert a stabilising effect on effective rents in the CBD, but note that a market recovery is unlikely in the short term. This is attributed to cautious demand and upcoming vacant space in the next six months totalling over 1.2 million sq ft.
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