Negative take-up shrinks in Q2: URA

Source : Business Times – 25 Jul 2009

THE office market has posted a third consecutive quarter of negative take-up, according to government data for Q2. However, the negative take-up of 247,570 square feet in the second quarter was smaller than the 322,917 sq ft in Q1 and the 365,973 sq ft in Q4 last year.

CB Richard Ellis executive director Li Hiaw Ho expects take-up to remain in negative territory for the rest of the year. ‘The impact of downsizing will be felt in the office sector for the next six months at least.’

Urban Redevelopment Authority (URA) figures show that the islandwide vacancy rate for offices continued to increase, hitting 10.8 per cent as at end-Q2 2009, compared with 10 per cent at end-Q1 2009 and a low of 7.3 per cent in second half 2007.

The vacancy rate for Category 1 space – office space in buildings in the Downtown Core and Orchard Planning Area which are relatively modern or recently refurbished, command relatively high rentals and have large floor plate size and gross floor area – was 6 per cent at end-Q2, up from 5.3 per cent at end-Q1. The vacancy rate for Cat 2 space (the rest of Singapore’s office stock) rose from 11 per cent at end-Q1 to 11.9 per cent at end-Q2.

The median rental contracted in Q2 for Cat 1 offices was $10.59 per square foot per month, down 8.4 per cent from the preceding quarter. The drop was smaller than a 12 per cent decline in Q1.

However, the median rental for Cat 2 space fell 7.6 per cent to $5.11 psf per month in Q2 – a bigger fall compared with the 6.9 per cent drop in Q1.

Cat 1 median rental has eased nearly 28 per cent from the peak of $14.70 psf in Q2 2008. Over the same period, the Cat 2 median rental has slipped 21 per cent.

Looking ahead, property consultants are predicting gentler declines in office rents for the rest of 2009, while cautioning that the office market is unlikely to be out of the woods until demand turns positive.

In the retail property sector, the completion of ION Orchard and Orchard Central caused the vacancy rate for shop space in the Orchard Planning Area to spike to 16.2 per cent at end-Q2 from 4.7 per cent a quarter earlier. URA pointed to the lag time taken for tenants to retrofit and occupy the shop space in the newly completed malls.

CBRE’s Mr Li said: ‘These new malls already have high pre-commitment levels and vacancy rates in Orchard should move back to the 90 per cent level within a year, once tenants have moved in and started operations.’

The median rental signed in Q2 eased 2.4 per cent over Q1 in Orchard and Rest of City Area and fell a smaller one per cent in Outside City Area.

URA’s rental indices for flatted factories and warehouses slid 4.2 per cent and 9.2 per cent respectively in Q2 over Q1. Warehouse vacancy rate rose from 7 per cent in Q1 to 9 per cent in Q2. Factory vacancy increased from 7 per cent to 7.8 per cent over the same period.