Research &
Forecast Report
SINGAPORE | OFFICE
3Q 2015
Market headwinds dent office rents
in 3Q 2015
The Singapore office property market continued to move in
favour of tenants in 3Q 2015.
Occupier demand slowed considerably in the July to September
2015 period, as firms have turned increasingly pessimistic on the
back of the deceleration in China’s economic growth to 6.9% in
3Q 2015.
Leasing activities in the three months ending in September 2015
were dominated by relocation and flight-to-quality deals, with the
technology sector taking centre stage as e-commerce takes off
in the region and firms shift from labour-intensive to technologydriven production.
Leasing activities…were dominated by
relocation and flight-to-quality deals, with
the technology sector taking centre stage as
e-commerce takes off in the region and firms
shift from labour-intensive to technologydriven production.
For example, the rising international transportation network
company, Uber and the Singapore-based social marketing firm,
Gushcloud expanded and relocated from current premises
outside the Central Business District (CBD) to Mapletree Anson,
a commercial development in the Shenton Way/Tanjong Pagar
micro-market, occupying about 21,000 sq ft each.
Other flight-to-quality deals sealed in 3Q 2015 include
Commonwealth Bank of Australia and online travel company
Expedia leasing around 20,000 sq ft and 26,000 sq ft,
respectively, in the recently completed South Beach Tower in the
Marina/City Hall micro-market. Commonwealth Bank of Australia
will be moving from its current premises at Millenia Tower in the
same micro-market while Expedia is currently operating from a
shophouse in Hongkong Street.
In the Raffles Place/New Downtown micro-market, the global
finance group from Italy, UniCredit, has taken up around 18,000
sq ft in One Raffles Quay and will relocate from its current
premise of about 12,000 sq ft at Prudential Tower in the same
micro-market.
Islandwide office rents hit an inflexion
point in 3Q 2015 after nine quarters of
growth
The combination of slowing leasing demand and looming
pipeline supply in 2016 has spurred landlords to offer attractive
deals to maintain occupancy rates. As a result, office rents
finally hit an inflexion point in 3Q 2015 after nine consecutive
quarters of growth.
Weighed down by stiff competition from pipeline Premium Grade
projects and soft sentiments among banks, financial institutions,
and oil and gas companies, rents for Premium and Grade A
office space in the Raffles Place/New Downtown micro-market
recorded steeper falls than Grade A office space in the Shenton
Way/Tanjong Pagar micro-market and Grade B space in the CBD.
The lowering of rental expectation by landlords of Premium and
Grade A office space has facilitated the flight-to-quality tenant
movement in 3Q 2015.
Office Rents
Average Monthly Gross Rents of Office Space
MICRO-MARKET
AVERAGE MONTHLY GROSS RENTS
($ PER SQ FT/MONTH)
QUARTER-ON-QUARTER CHANGE (%)
3Q 2015
2Q 2015
3Q 2015
2Q 2015
11.68
11.93
-2.1
0.0
Raffles Place/New Downtown
10.18
10.43
-2.4
0.2
Shenton Way/Tanjong Pagar
8.85
9.00
-1.7
0.0
Marina/City Hall
9.79
10.04
-2.5
0.7
PREMIUM
Raffles Place/New Downtown
GRADE A
Beach Road
7.97
8.13
-2.0
0.0
Orchard Road
8.89
9.04
-1.7
0.4
City Fringe
7.80
8.05
-3.1
0.1
Suburban
5.08
5.18
-1.9
0.0
8.61
8.76
-1.7
0.2
GRADE B
Raffles Place/New Downtown
Shenton Way/Tanjong Pagar
7.83
7.98
-1.9
0.9
Beach Road
7.07
7.23
-2.2
0.0
Orchard Road
8.50
8.65
-1.7
0.5
City Fringe
7.16
7.31
-2.1
0.0
Suburban
4.42
4.53
-2.4
3.4
Source: Colliers International Research
The average monthly gross rents for Premium Grade office space
in the Raffles Place/New Downtown micro-market eased by 2.1%
quarter-on-quarter (QoQ) from $11.93 per sq ft in 2Q 2015 to $11.68
per sq ft in 3Q 2015. Meanwhile, that for Grade A office space in the
same micro-market fell by 2.4% QoQ to $10.18 per sq ft.
In comparison, the average monthly gross rents for Grade A office
space in the Shenton Way/Tanjong Pagar micro-market slid by a
lesser 1.7% to end the quarter at $8.85 per sq ft. Grade B offices
in the CBD also witnessed milder rental declines ranging from
1.7% to 2.2% in 3Q 2015, primarily due to a lower rental base.
Occupancy Rates
Average Occupancy Rates for Premium Grade and Grade A Office Space by Micro-market
MICRO-MARKET
AVERAGE OCCUPANCY RATE (%)
3Q 2015
2Q 2015
91.4
92.1
Raffles Place/New Downtown
97.8
97.0
Shenton Way/Tanjong Pagar
96.2
98.5
Marina/City Hall
97.4
95.7
Beach Road
89.2
96.9
Orchard Road
96.2
96.9
City Fringe
97.5
97.1
Suburban
96.3
96.4
PREMIUM
Raffles Place/New Downtown
GRADE A
Source: Colliers International Research
Consequently, the overall occupancy rate for Grade A office space
in the CBD remained relatively unchanged at 97.0% on the back
of mixed performances of individual micro-markets. Despite
leasing activities driven by flight-to-quality tenant movement, the
average occupancy rate for Premium Grade office space in the
2
Raffles Place/New Downtown micro-market fell marginally to
91.4% in 3Q 2015 from 92.1% in 2Q 2015 after two successive
quarters of growth. This could be attributed to the slow backfill of
space returned by some banking and finance firms.
Singapore Research & Forecast Report | 3Q 2015 | Office | Colliers International
The average occupancy rate for Grade A office space in the
Raffles Place/New Downtown micro-market saw a slight
increase to 97.8% from 97.0% in the preceding quarter. The
Marina/City Hall micro-market also witnessed a slight climb of 1.7
percentage points in occupancy rate to 97.4% in 3Q 2015. This
can be attributed to the flight-to-quality leasing activities.
However, the average occupancy rate for Grade A office space
in the Beach Road micro-market dived 7.7 percentage points to
89.2% in the July to September 2015 period as flight-to-quality
saw a number of tenants relocating to the Raffles Place/New
Downtown micro-market.
The average occupancy rates for Grade A office space in the
remaining micro-markets including Orchard Road, City Fringe and
Suburban remained relatively unchanged at above 96.0%.
Toppish prices and soft rental market
continued to dampen strata sales
In the strata-titled office sales market, toppish prices, a
challenging rental market and the continued enforcement
of the Total Debt Servicing Ratio requirement remained as
dampening factors. The absence of new sale launches in 3Q
2015 also resulted in a quiet strata-titled sales market. Excluding
transactions that were above $5.00 million, which are typically
considered as investment sales, the Urban Redevelopment
Authority’s Real Estate Information System (REALIS) showed
that a total of 56 caveats were lodged for strata offices in 3Q
2015, down from 101 a year ago and 76 in the preceding quarter.
These reflect year-on-year (YoY) and QoQ falls of 44.6% and
26.3%, respectively.
Due to the lack of impetus for growth, the average capital values
for Premium and Grade A office space in the Raffles Place/New
Downtown micro-market stayed flat at the preceding quarter’s
levels of $2,821 per sq ft and $2,532 per sq ft, respectively, in
3Q 2015.
Average Capital Values for Premium Grade & Grade A
Office Space in Raffles Place/New Downtown
Rents to trend down 2%-4% in 4Q 2015
The cautious office occupier and investor mood seen in the three
months ending in September 2015 is expected to continue into
the final three months of the year.
Singapore’s Ministry of Trade and Industry has lowered the
upper end of its economic growth forecast from 4.0% to 2.5%.
Singapore’s economy is now expected to expand by between
2.0% and 2.5% in 2015 compared to the earlier forecast of
between 2.0% and 4.0%. The downward revision came after
Singapore recorded a slower annual growth of 1.7% in its Gross
Domestic Product (GDP) in 2Q 2015. The latest forecast growth
rate of 2.0% to 2.5% is lower than the average annual GDP
growth rate of 4.9% from 2011 to 2014.
Beyond Asia, the United States (US) was the only bright spot
in the world economy, with a 3.9% growth in GDP in 2Q 2015
resulting from the improvement in consumer and construction
spending, which grew by 3.6% and 4.1%, respectively. Aside
from the US, the Eurozone economy experienced slower growth
resulting in a deflation of 0.1% in September 2015.
In Asia, China is undergoing a slowdown in the economy with
a target GDP growth rate of 7% in 2015 after averaging 10% in
growth rate for three decades.
According to the International Monetary Fund, the global economy
is expected to experience its worst year since the global crisis
in 2009 due to weaker growth in Europe, China and other
developing markets despite signs of recovery in the US.
With the decelerating mode of the Singapore and regional
economies, coupled with the looming new supply of 4.5 million
sq ft in 2016 and 1.1 million sq ft in 2017, office rents are
expected to fall further by between 2.0% and 4.0% in the last
quarter of 2015.
In the strata-titled office sales market, Woods Square in
Woodlands is expected to be launched for sale in the next three
months. Woods Square is a 99-year leasehold mixed-use project
comprising two 16-storey office towers and retail space at the
ground and basement levels. It will enjoy direct connection to
the Woodlands Mass Rapid Transit (MRT) Station. The project
could possibly pique investment interests given the planned
development of the North Coast Innovation Corridor and the
project’s first-mover status in the Woodlands Regional Centre
This could give sales activity outside the CBD a slight boost in
4Q 2015.
Nonetheless, overall sales activity looks likely to stay anaemic.
Coupled with softening rents, capital values for Premium and
Grade A office space in the Raffles Place/New Downtown micromarket should remain flat for the rest of 2015.
Source: Colliers International Research
Due to the lack of impetus for growth, the average capital values
for Premium and Grade A office space in the Raffles Place/New
Downtown micro-market stayed flat at…$2,821 per sq ft and
$2,532 per sq ft, respectively, in 3Q 2015.
3
…overall sales activity looks likely to stay
anaemic. Coupled with softening rents, capital
values for Premium and Grade A office space
in the Raffles Place/New Downtown micromarket should remain flat for the rest of 2015.
Singapore Research & Forecast Report | 3Q 2015 | Office | Colliers International
502 offices in
67 countries on
6 continents
United States: 140
Canada: 31
Latin America: 24
Asia Pacific: 199
EMEA: 108
MARKET CONTACT:
Calvin Yeo
Deputy Managing Director
calvin.yeo@colliers.com
Colliers International | Singapore
1 Raffles Place
#45-00 One Raffles Place
Singapore 046818
TEL +65 6223 2323
FAX +65 6222 4901
RCB No. 198105965E
$2.3
billion in
annual revenue
1.7
billion square feet
under management
16,300
professionals
and staff
About Colliers International Group Inc.
Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate
services with more than 16,300 professionals operating from 502 offices in 67 countries. With an enterprising
culture and significant insider ownership, Colliers professionals provide a full range of services to real
estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions,
investment sales and capital markets, project management and workplace solutions, property and asset
management, consulting, valuation and appraisal services, and customized research and thought leadership.
Colliers International has been ranked among the top 100 outsourcing firms by the International Association
of Outsourcing Professionals’ Global Outsourcing for 10 consecutive years, more than any other real estate
services firm.
colliers.com
Copyright © 2015 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to
ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult
their professional advisors prior to acting on any of the material contained in this report.