Chart of the Day: Office vacancy levels to spike as struggling energy companies downsize

Demand will head south.

The continued rout in oil prices is dampening office space demand in Singapore, according to a report by CBRE.

CBRE noted that while there are clear signs that the contraction phase in the financial sector may be nearing an end, the turmoil in the energy sector is impacting oil and gas tenants and a phase of right sizing may be anticipated.

The poor demand for office space is starkly illustrated by low confirmed pre-lease commitment levels in projects which are about to launch in the Central Business District (CBD), including DUO, Guoco Tower and Marina One.

In the first quarter of 2016, islandwide net absorption level was -133,474 square feet, the third consecutive quarter of negative absorption. Vacancy levels stood at 5.8%.

"Vacancy levels are expected to rise sharply as the market awaits the completions of major new CBD developments from Q3 2016 onwards. CBRE expects the down cycle to persist through the rest of the year," CBRE said.