Commercial property sector facing price and rent squeeze

As the supply of commercial spaces increase, demand has not unfortunately shown a proportionate growth, resulting in a squeeze on prices and rents. Across the board in the third quarter, prices and rental rates have fallen while vacancy rates are on the rise.

tuaswarehouseWhile things in the manufacturing sector has picked up, a bigger turnaround needs to happen before a corresponding uptake in the commercial property industry. The warehouse sector has taken the hardest hit apparently, with a 4.4 per cent fall in rent from Q2. Industrial property prices fell 1.7 per cent, a 7.8 per cent fall in a year-on-year comparison with Q3 of 2015. Rents in the same segment fell 2 per cent in the third quarter. Property experts are expecting similar market reactions for the next few quarters ahead.

kampunbahrushophouseMore rare commercial spaces such as shophouses are however entering the market at more reasonable prices than before. And with selling prices low, investors who might be looking at very long-term prospects of the commercial property market here might be picking off deals. The increase in industrial space – almost 3 million square metres – by end of 2017 will also put further pressure on prices, which could mean a market shift towards the tenants and investors while landlord struggle against the competitive grain.