Office rents to decline in Q4 as financial services industry outlook deteriorates

The energy industry’s prospects are bleak as well.

The office segment was the property sector’s golden boy in 2014, driven by steady rent increases amid a near-term supply squeeze. However, Nomura cautions that the segment’s fate may turn come the fourth quarter of 2015, on back of a deteriorating outlook for the financial services industry and the energy and resources industry.

Nomura’s report states that such an earlier-than-expected rent decline is possible as tenants from these sectors are important drivers of CBD Core office demand.

These tenants account for 30-60% of CapitaCommercial Trust’s. Suntec REIT’s, and Keppel REIT’s portfolio.

“With the outlook for these industries deteriorating, we believe leasing demand could slow more than what the market is expecting and usher in an earlier-than-expected decline in office rents,” stated the report.