Singapore’s new office leases declined by more than half as tenants such as Barclays PLC gave up space, while companies including Google Inc moved out of prime office districts to cut costs.
The proportion of new leases dropped to 6 percent of all signed in the first six months from 15 percent a year earlier, according to the latest figures compiled by commercial property broker Cushman & Wakefield Inc.
“Companies have become less optimistic about the outlook,” Cushman Singapore-based managing director of Asia-Pacific research Sigrid Zialcita said. “There are a growing number of tenants gravitating to non-core, Grade-A buildings and business parks due to lower rents and ample space options.”
The city-state’s economy, heavily reliant on exports, is staring at a rough patch. Exports fell for the first time in three months in May and business costs have been rising since the government slowed the inflow of foreign workers in 2010. Employment shrank in the first quarter as manufacturing and construction jobs fell.
Cushman estimates a combined 80,733m2 of prime office space, which command higher rent, are to become available as financial services firms move out of the central business district over the next six months.
More than 27,871m2 was vacated by new technology firms in the year ended in March, the broker said. Companies said lower rent gave them flexibility to expand and freed up capital for other expenses or for hiring, it said.
Grade-A office rent in the central business district could slide 14 percent over the next two years, Cushman estimated, as 371,612m2 of prime office space are to be added next year.
“What’s contrasting is that more than half the relocations this year were a flight to value, where companies signed up contracts in cheaper buildings,” Zialcita said. “This is a big turnaround from 2014, where flight to quality was the main theme driving office leasing, with 71 percent of the space signed up in newer and more expensive buildings.”
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