Chart of the Day: Upcoming office supply to plunge in 4 years

This is a positive for rents, which could improve gradually as supply for space is squeezed.

This chart from DBS Equity Research shows office supply is expected to plunge to new lows starting 2018 and ending 2022.

In 2017, office supply grew to nearly 2.5 million sqft. This is expected to decline to less than 1 million sqft this year to a new low of 200,000 sqft in 2019. Office supply is expected to go up again in 2022 but in a smaller amount than in 2017.

But with modest new supply over the next three to four years, the brokerage thinks Singapore on the cusp of another period of sustained improvement in spot rents.

DBS Equity Research analyst Mervin Song noted that the office sector will provide the best leverage to the cyclical upturn in the Singapore economy. “Various landlords reported increased leasing enquiries and tenants being more eager to renew their leases in anticipation of spot rents climbing higher. This potentially could provide a tailwind towards the end of 2018 and early 2019, with signing/spot rents increasing to a level when negative rental reversions stop and/or even office REITs reporting positive rental reversions.”

Cushman & Wakefield (C&W) previously said that the expansion of tech and real estate players lifted leasing demand from 14% to 50% during 2014 to 2017.