• IP addresses are NOT logged in this forum so there's no point asking. Please note that this forum is full of homophobes, racists, lunatics, schizophrenics & absolute nut jobs with a smattering of geniuses, Chinese chauvinists, Moderate Muslims and last but not least a couple of "know-it-alls" constantly sprouting their dubious wisdom. If you believe that content generated by unsavory characters might cause you offense PLEASE LEAVE NOW! Sammyboy Admin and Staff are not responsible for your hurt feelings should you choose to read any of the content here.

    The OTHER forum is HERE so please stop asking.

Economic crisis : Office demand shrinks in Q4 last year

DerekLeung

Alfrescian
Loyal
Office demand shrinks in Q4 last year

20090203.120543_office.jpg


By KALPANA RASHIWALA

NET take-up for office space hit negative territory in Q4 last year - the first fall in nearly five years - as financial institutions and other businesses began to downsize their operations.

The net demand for office space fell by almost 366,000 sq ft in Q4, according to figures released by Urban Redevelopment Authority recently. This surprised some property consultants. 'Based on past experience, there's usually some time lag between a weakening in the financial services sector and shrinkage of office demand. This time, the drop in demand came pretty fast,' a seasoned property consultant said.

This brought the net increase in office demand for the whole of last year to just 193,750 sq ft, or not even 10 per cent of the 2.07 million sq ft for 2007.

Market watchers are predicting negative take-up for the whole of this year. 'We expect demand to continue shrinking as companies rightsize their operations. That will throw up shadow space as companies try to sublet excess space that they no longer require,' says DTZ executive director Ong Choon Fah.

The last time the Singapore office market saw negative full-year demand was in 2002 and 2003 in the aftermath of the dotcom bubble bust, 911 and Sars.

Analysts say the latest negative take-up of offices in Q4 2008 also reflects the impact of office vacancies caused by shadow space.

This is because URA compiles occupancy data based on the actual physical occupation of space, and not in terms of the space that is rented out, a URA spokeswoman told BT. Hence, tenanted office space that is currently not used or left vacant (that is, shadow space) is counted as vacant space, she added. Questions in URA's quarterly surveys on vacant office space are crafted explicitly to inform landlords and tenants they should report shadow space which is not occupied as vacant space.

DTZ's Mrs Ong expects 'quite significant' negative demand in 2009, pointing out that 'we're starting to see new supply coming in as well'. New projects expected to be ready this year include 71 Robinson Road, the Straits Trading Building redevelopment, Tampines Grande and an extension to 78 Shenton Way.

In all, about 1.7 million sq ft of new offices are slated for completion this year, according to CB Richard Ellis' estimates, up slightly from last year's figure of 1.4 million sq ft. The figure will rise to 2.8 million sq ft in 2010, followed by a further 2.5 million sq ft in 2011.

Cushman & Wakefield Singapore managing director Donald Han points out that leasing pre-commitments for new office projects were substantially made when occupiers were in expansionary mode in the past few years. 'So a lot of users signed up leases, planning for future expansion. As these new projects get completed, whether they're in the CBD or business parks or on transitional office sites, the new space these users take up (at least initially) will be more than what they're giving up in their existing premises.

'This may help to some extent to offset the fall in office demand caused by companies that are closing down in Singapore or reducing their operations here.'

'Net-net, we may see negative take-up of below 500,000 sq ft this year,' Mr Han predicts. 'For major corporates, a lot of decisions to downsize are driven by HQs; Singapore operations don't have autonomy on this. So it's hard to predict actual numbers.'

Meanwhile, shadow office space continues to grow. BT understands Citibank has in total about 150,000 sq ft shadow space - including five floors at Millenia Tower, a partial floor each at Centennial Tower and Capital Square, and four floors at Tampines Plaza. Much of the space is being given up due to Citi's move to new premises at Changi Business Park (CBP). This will be done in two phases, the first of which is beginning in Q2 2009. A Citi spokeswoman said all the bank's operations, technology and shared services functions currently housed at six major buildings will be moved to CBP in phases. 'With the relocation, the current office space in these buildings will be scaled down accordingly,' she added.

Credit Suisse is said to be contemplating releasing two floors at One Raffles Quay's North Tower (about 36,000 sq ft). However, a spokeswoman for the bank said: 'We have no immediate plans to give up office space in our existing premises, but are continually reviewing and assessing our real estate needs in all our locations.' The bank's current locations here include ORQ's North Tower, One Raffles Link and Changi Business Park. In addition, the Credit Suisse APAC Regional Data Centre in Serangoon will be ready for operation in May.

UOB-Kay Hian will give up about 90,000 sq ft (at UOB Plaza 1 and OUB Centre) when it moves to its own transitional office project at Scotts Road this year.

CBRE data show that both prime and Grade A average monthly office rental values fell about 20 per cent quarter-on-quarter in Q4 2008 to $12.90 psf and $15.00 psf respectively. This brought the full-year decline to 14 per cent for prime space and 12.5 per cent for Grade A space.

Cushman and Wakefield predicts the average monthly prime office rental will fall nearly 20 per cent this year.


This article was first published in The Business Times on February 02, 2009.
 
Top