Office landlords struggle to keep tenants as employment growth slows to a crawl

Things will get worse as bank hiring shrinks.

A staggering deluge of prime office space is set to hit Singapore in 2016, and analysts warn that there might be very few tenants around to occupy this space.

An analysis by Maybank Kim Eng showed that 4.2 million square feet (sf) of prime office space is due to be completed this year, over four times the market’s annual absorption rate of 0.9m sf.

The amount of available space will increase further as existing tenants move out or downsize. Citing statistics from CBRE, Maybank Kim Eng said that an estimated 691,000 of secondary space could surface from 3Q15 to 2016.

Filling up the incoming prime office supply would require the creation of 42,000 jobs, said Maybank Kim Eng. This is relatively unlikely, as the entire services sector only managed to churn out 21,400 jobs in the first six months of the year.

“To put things in perspective, we estimate that 42,000 new jobs would need to be created to fill the new prime office space due to be completed in 2016. Finance & Insurance, the biggest user of such space, generated just 2,000 new jobs in 1H15,” Maybank Kim Eng said.

The report added that even with all the hype surrounding its growth prospects, the Information, Communications and Professional Services segment created just 11,600 in the first half. 

“We believe landlords could struggle to fill their coming supply with such limp job creation. While the supply pipeline will shrink from 2017, we still foresee elevated vacancy rates till at least 2018,” Maybank Kim Eng said.