This will be a bad year for business parks, analysts warn

Rents will drop on back of slow demand.

Business parks used to be the sole bright spot of Singapore’s slowing industrial leasing sector. However, the sector appears to have finally run out of luck this year, according to analysts from DTZ.

Business park rents slipped in the fourth quarter of 2015, the first drop since the third quarter of 2012. For the full year, business park rents fell by 0.4%, a far cry from the 6.8% year-on-year increase in 2014.

DTZ warned that rents of business parks in 2016 are expected to face greater downward pressure with 1.5 million sq ft of lettable business park space coming on board in 2016, along with subdued business confidence.

Additionally, the softening of office rents and projected completions of office developments in the CBD in 2016 will exert further pressure on rents of business parks.
This situation bodes well for tenants who want to upgrade their space, the report said.

“Although market conditions for business parks are anticipated to be weaker in 2016, it is an opportune time for companies with expiring leases to review their accommodation strategies and leverage on market conditions to upgrade to better quality space. Additionally, landlords are likely to be more pragmatic and flexible in packaging competitive lease terms to attract and retain tenants,” said Cheng Siow Ying, DTZ’s Executive Director of Business Space.