AVERAGE monthly gross rents in the CBD (central business district) declined by 4.1 per cent quarter on quarter (q-o-q) to S$10.40 per square foot in Q3, the first decline from an uptrend since 2013, said DTZ Southeast Asia.
This comes on the back of headwinds in the external economic environment.
Average monthly gross rents in Marina Bay dropped 5.5 per cent q-o-q to S$13 per sq ft, while rents in Raffles Place fell 3.4 per cent q-o-q to S$10.45 per sq ft per month. Similarly, average rents in the city fringe - such as Beach Road, Anson Road and Orchard Road - declined by 2.1 per cent q-o-q to S$8.25 per sq ft per month.
"The subdued global growth and China's economic slowdown contributed to a less optimistic outlook for Singapore, with the Ministry of Trade and Industry (MTI) narrowing the GDP growth forecast for 2015 to be between 2 and 2.5 per cent in August 2015," said DTZ.
Cheng Siow Ying, DTZ executive director (business space), added: "Leasing incentives have increased as landlords compete to retain and attract tenants to sustain or improve space take-up. These leasing incentives can be in the form of longer fitting out periods, rent holidays or rental rebates, which will yield lower net effective rents for the occupiers."
As such, office occupancy in the CBD declined 0.9 percentage-points q-o-q to 95 per cent in Q3. Within the CBD, both Shenton Way and Marina Bay registered q-o-q decreases in occupancy rates of 1.8 percentage-points and 1.1 percentage points to 94.3 per cent and 94.1 per cent respectively. On the other hand, Raffles Place's occupancy edged up 96.7 per cent in Q3 from 96.3 per cent in Q2, supported by the relatively healthy occupancy rates of newer developments such as CapitaGreen.
"The large impending supply of office space is expected to place greater downward pressure on rents in the CBD in 2016," DTZ added. "About 2.6 million sq ft office space will come on board next year in the CBD."