In the commercial property market, the effects of demand and supply is more strongly felt that ever as many new developments enter the market in line with the government’s efforts to grow and restructure the country’s commercial sector.
The positive outlook and sentiments in the private property market here does not seem to have rubbed off in the commercial sector as office rents fell 3.4 per cent in Q1 and retail rents fell 2.9 per cent – its 9th consecutive quarter of price declines. Prices of office spaces also fell 4 per cent in the first quarter of the year, following the 0.6 per cent fall from last year’s Q4. The numbers do not reflect the 2.5 per cent expansion of Singapore’s economy in the first quarter of the year, largely boosted by manufacturing and other trade-dependent sectors.
Other than Marina One which found tenants quickly, landlords of older commercial establishments are finding it increasingly difficult to compete with the newer offerings and have found themselves having to drop their prices in order to source for more tenants, even as more companies are relocating into cheaper and newer buildings outside of the core central region. Some companies are also exploring co-working options, which decreases the demand for commercial real estate on a permanent basis. New commercial buildings such as GSH Plaza and Guoco Tower will also increase the supply of prime office spaces in the Central Business District (CBD) and as these landlords are already raising their asking rents for Grade A office spaces, property analysts are expecting the country’s economic growth to fuel the commercial property market as the year moves on.