Rents seen to dip 10% in 2012 due to anemic demand

At a little more than 1 million sq ft, DTZ notes that the increase in supply for office space in 2012 is less than half of what it used to be in 2011.

New supply for office space this year is around 1.1 million square feet compared to 2.4 million square feet last year.

A major office completion next year will be the Marina Bay Financial Centre Tower 3 which has more than half of its available space pre-committed.

In a statement, DTZ said that while the lower increase in supply in 2012 will provide some breather to landlords, “shadow space” representing excess office space that companies have leased but are looking to sublet or assign is noted to be on the rise.

Approximately 187,000 sq ft of shadow space is currently available, almost double the estimated 102,000 sq ft of shadow space in Q3 2011. The majority of the shadow space (46%) is in the Marina Bay area as some companies put back excess space that was pre-committed earlier into the market.

Raffles Place also has a significant share of shadow space (35%) as companies that have relocated to Marina Bay look for sub-tenants to occupy the vacated space.

Chua Chor Hoon, Head of DTZ Asia Pacific Research, said: “As firms scale back on expansion plans and reduce headcount in the light of expected slower economic growth next year, office demand is expected to be weaker in 2012 which will place downward pressure on office rental values. We expect a moderate fall of less than 10% in rents, due to the smaller increase in supply in 2012.”