MENU

Office property vacancies continue recovery as prices continue upwards trend

by • August 12, 2019 • officeComments (0)349

Office property vacancies continue recovery as sales and rent prices continue upwards trend says a recent analysis by Colliers International. The report was reflecting on the URA real estate statistics for Q2 2019.

The report said that office property vacancies continued to recover as sales prices and rents continued its upward trend, thanks to stronger demand for space mainly from technology and flexible workspace sectors, as well as a larger investment appetite for prime office assets.

“In Q2 2019, URA’s Office Rental Index for the Central Region rose 1.3% QOQ, after a blip in Q1 2019. Rental growth at the Fringe Area was particularly strong at 4.5% QOQ, while the Central Area also showed an improvement of 0.4% QOQ. Currently, URA’s Office Rental Index for the Central Region is 7.4% below the most recent peak in Q1 2015.

With healthy net absorption mainly from the technology and flexible workspace sectors, island-wide vacancy as tracked by URA declined 0.3ppt QOQ to 11.5% during Q2 2019.

Office sales prices also showed a similar uptrend, with URA’s Office Price Index for the Central Region rising 0.9% QOQ in Q2 2019, although the pace of growth has slowed from the 3.0% QOQ seen in the preceding period. Transactions remained robust, with two key contributing deals during the quarter, namely the sale of Chevron House and the divestment of a 50% stake in Frasers Tower.

The punitive ABSD measures on the residential sector since July 2018 should continue to fuel a shift in investor interest towards the commercial sector.”

office property vacancies

Image credit: Colliers International

Based on Colliers’ research, CBD Premium and Grade A gross effective rents gained momentum and grew 3.0% QOQ to $9.93 psf per month in Q2 2019. The strong net absorption was once again driven by technology and flexible workspace sectors, as vacancy tightened to 2.9% as of end-June 2019 from 3.9% as of end-March 2019.

Colliers Research forecasts that with a higher base for comparison in 2018, CBD prime office rents will likely grow at a slower pace – at about 8% – in 2019. While H1 2019 rental growth reached 5.4%, growth should slow going forward as tenants show resistance to further rent hikes.

Meanwhile, Grade A and Premium CBD office vacancy is expected to continue to trend below 6% until 2022 given tight CBD Grade A office supply of 2% of stock per annum over 2019–2021 versus 5% for the last five years. This should provide support for further rental growth from 2019-2021.

CBRE commenting on the office property vacancies said that there are warning signs over the outlook due to the ongoing trade war between the USA and China.

“After a surprising q-o-q dip of 0.6% last quarter, the office rental index in Central Region rebounded by 1.3% in Q2 2019. This was likely supported by higher rents achieved in newly completed developments that helped push the overall average rents upwards. The positive rental performance continued to support office prices which expanded by 0.9% q-o-q. That said, this quarter’s growth of 1.3% was still a slowdown from the previous quarter’s expansion of 3.0% — which possibly reflects investors adjusting their outlook of prices in the office segment.

Net absorption increased by 35,000 sqm in Q2 2019, accelerating from the 19,000 sqm recorded in the previous quarter. This healthy take-up could have been contributed by prior commitments in Funan, which gained TOP this quarter, and higher occupancy in recently completed buildings.”

This led to a compression by 0.3 percentage points from 11.8% to 11.5% in the office property vacancies said the report by CBRE.

“While overall office indicators were positive, there are warning signs over the outlook of the office sector. CBRE Research has observed more cautious sentiments as firms are assessing the full impact of the trade war, with more opting for renewals rather than committing capital expenditure to expand or relocate. Some right-sizing was observed in the banking sector, with consolidation and a drive towards efficiency seen in other industries.

In the wake of heightened economic headwinds, the outlook looks increasingly clouded – although the current supply situation is relatively tight, pre-commitments of pipeline projects have slowed considerably. These factors combined could potentially dampen rental growth prospects over the medium term.”

Mr Paul Ho, Chief mortgage officer of iCompareLoan said, “office property vacancies will continue to recover as the market is acutely aware of the tight vacancy rate and muted future supply.” The office market, especially the Grade A and prime office segment should see keen competition in the coming months,” Mr Ho added.

How to Secure a Commercial Loan Quickly

Are you planning to purchase a similar prime commercial redevelopment site but unsure of funding? Don’t worry because iCompareLoan mortgage brokers can set you up on a path that can get you a commercial loan in a quick and seamless manner.

Alternatively you can read more about the Best Commercial Loans in Singapore before deciding on your purchase.  Our brokers have close links with the best lenders in town and can help you compare Singapore commercial loans and settle for a package that best suits your commercial purchase needs. Our services are also very personalised and tailored to the unique needs of the buyers.

Whether you are looking for a new commercial loan or to refinance and existing one, our brokers can help you get everything right from calculating mortgage repayments, comparing interest rates, all through to securing the final loan. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us for your next purchase.

If you need advice on a new commercial loan  or Personal Finance advice.

If you want to speak to our trusted Panel of Property agents.

If you need refinancing advice.

Pin It

Related Posts

Simple Share Buttons