Singapore's Grade A office rents are under pressure

Rents to take another 5-10% slide in 2017.

Grade-A office rentals are expected to fall by another 5-10% over the next year as the market digests huge incoming supply, said RHB.

"There is about 3m sq ft of office space coming on-stream next year, compared to the 10-year average demand of 1.2m sq ft. This is expected to drive rental rates lower by 5-10%," the brokerage firm noted in a report.

Grade-A office rentals declined 2% QoQ in 3Q16 (4% in 2Q16) and have fallen 15% YoY to SGD9.30psf per month, according to CBRE.

On the positive side, office net absorption turned positive at 820,417 sq ft in 3Q16 after four consecutive quarters of net negative absorption.

While the pick-up in overall office sector leases is positive, RHB said that most of the new leases signed point to shifting demand – as tenants take advantage of falling office rental rates to move into bigger, more efficient office spaces in newer developments in the CBD area.

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