Property sector in Singapore continues to experience hard times, with the office market sharing the same predicament.
Government data revealed that the segment plunged for two consecutive quarters. Meanwhile, as rentals and prices went slipping, the broader property market also took a hit.
A drop of almost 323,000 sq ft was observed in office take-ups in this year’s first quarter, from 366,000 sq ft in the final quarter of the previous year. This causes offices vacancies all over Singapore to increase to 10 percent by the end of the first quarter in 2009 from the 8 percent increase in the final quarter of the previous year. Since the final quarter of 2006, this is Singapore’s first time to ever experience double-digit office vacancies.
Moray Armstrong, executive director in office services of CB Richard Ellis, said that negative take-ups are likely to hit the office market in Singapore. “Many of the corporates we talk to are well advanced in implementing their restructuring programmes. From this, we deduce we may be going through the period of sharpest contraction in office demand now. Contraction may ease in the second-half”, Mr. Armstrong said.
“The outlook for office rents remains bearish because of the negative take-up and the onset of greater supply from completion of new office developments”, Mr. Armstrong added.
Office vacancies are being expected by CBRE to rise, while the competing Colliers International calculates that Grade A space’s average gross rental per month in the central district will get to recover by 30 percent throughout the next three quarters of the year.
Business park space was also affected by the low demand in office sector. It saw a negative take-up of around 215,000 sq ft in the first quarter, versus the10,700 sq ft positive take-up in the final quarter of 2008. The sector’s vacancy rate increased to 9.7 percent in first quarter of 2009 from the 6.2 percent in the final quarter of 2008.
With the total islandwide price index of URA slipping 14.1 percent in the first quarter over the previous quarter, the private residential segment seems to be in a rather risky position. The drop in the first quarter is the largest quarterly drop so far.
Tay Huey Ying, director of Colliers International, said, “Mass market homes could see more gradual price corrections averaging about 8 to 12 per cent over the next three quarters (from Q1 2009 levels) as more sellers in the secondary market as well as developers with unsold units from earlier launches can be expected to adjust the pricing of their properties to near-current levels”.
The director of Colliers International expects larger average price drop of 10 to15 percent for the high-end/luxury and mid-tier segments throughout the same period.
Private residential rental indices of URA suggested that the first quarter’s sharpest contraction was for Core Central Region’s non-landed homes, which fell 10.3 percent quarter on quarter. Li Hiaw Ho, CBRE executive director, said, “The decline in rents could be attributed to supply outstripping demand as more expats left the country and to more new projects being completed”.
A total of 2,596 private units were sold by developers in the first quarter. This was six times the 419 units sold in the final quarter of 2008.
The latest figure in the first quarter was low by 64 units compared to the 2,660-unit figure gathered from January to March 2009’s developer sales stats.
The completion of about 27,423 private homes is projected between the second quarter of 2009 and 2011, though the Q4 2008 data of URA anticipates about 31,004 units.
The URA spokeswoman also said that the redevelopment of particular sites they had purchased may be postponed by delayed construction and en bloc sales.
Shop rental index of URA improved by 3.3 percent quarter on quarter in the first quarter, subsequent to the 0.6 percent drop in the final quarter.
“For the private residential sector, there’s evidence of a pick-up in activity – not just in the primary market but also subsales and resales. For office and industrial, there are going to be more rental declines because of the economic slowdown. Retail will be difficult. New malls opening this year may drum up business, but it will be at the expense of existing malls, given that tourism numbers are weak”, said Knight Frank Managing Director Tan Tiong Cheng.