Chart of the Day: Core CBD office supply to excessively jump to 2m sq ft in 2016

As Marina One unleashes prime office spaces.

In a recent report, Barclays said it hosted Desmond Sim, Head of CBRE Research for Singapore and Southeast
Asia, in a luncheon meeting with investors.

He revealed that CBRE expects the government could start easing the residential measures as early as Dec 2015, office rents to soften on the plentiful prime office space in 2016 and the retail space sector to remain weak on structural challenges.

Here's more from Barclays' report:

CBD office demand has become diversified over the years as companies in insurance, legal, media, internet and resources industries took up the slack of financial institutions. CBRE estimates annual net absorption of 1.1mn sqft office space in 2014 which is a 49% y/y decline, and CBRE expects an island-wide net absorption of 0.7mn sqft in 2015 as it sees mainly musical chair movement with few new demand drivers.

The current rent should still hold up in light of the very tight occupancy with just 5.1% Grade A vacancy rates as of 1Q15. However, with 3.6mn sqft of office space coming in 2016, CBRE expects rents to fall 10-15% over 2016-17 but potentially rebound by 2018 in view of lack of supply until 2021.

The most recent Government Land Sale (GLS) only released one CBD site which is at Central Boulevard on the Reserve List and even if it is triggered by end of this year, it will take at least five years to build, and will only come through in 2021.

CBRE said Marina One, with its upcoming 1.88mn sqft of new office space, is asking for “CapitaGreen-level’ rents, which we estimate to be S$9-10psf pm for anchor tenants, though has not announced any signings.

CBRE expects the 3.6mn sqft of prime office space that will be completed in 2016 to be manageable if spread over five years, but if concentrated in a single year, would put pressure on rents.