Big-ticket leasing deals elude Singapore business parks in Q2

Weak property, business sentiment have weighed down the market.

Large leasing deals for business parks have been few and far in between this year, with transactional and enquiry activity were largely supported by smaller and mid-sized space requirements coming in from consumer products, technology, and biomedical sectors.

According to a report by CBRE, Singapore's business parks sector, however, put in a robust performance overall in Q2, although effects from the weak overall business and property sentiment have begun to weigh the market.

Moreover, most of the demand has been focused on freshly completed developments like Ascent and Mapletree Business City II (MBC II).

CBRE asserts, though, that some deals remain in the pipeline from the technology and banking sectors looking for pockets of expansion in existing stock in the Rest of Island submarket. Further, the addition of MBC II puts CBRE Research's City Fringe rent up by 1.9% QoQ in 2Q16. Meanwhile, Rest of Island Business Parks rent remained stable at $3.70 psf/mth.

Nevertheless, CBRE observes that landlords have started revising their rental expectations downwards for some of the older buildings in the decentralised areas in a bid to drum up occupancy.

Moving forward, given that the only known pipeline projects are built-to-suit schemes, islandwide occupancy is seen to gradually pick up. This is thanks to softer demand being balanced out by the dearth of new multi-user completions.

In addition, newer projects like Ascent and MBC II should gradually clinch more tenants. However, this may come at the expense of occupancy in Rest of Island business parks, which will face challenges in competing for a limited pool of tenants.

On the rental side, the thinning premium office and business parks rents is anticipated to make landlords cautious. CBRE asserts that their focus will be on bolstering occupancy for the rest of 2016.