The central region’s net performance in relation to office space rentals has been stable and doing well until the period of SARS kicked in. All industries and markets were affected, one of which is the property market including office space rentals. On record, the net average for office space rental in the area noted its biggest quarterly performance as it declined to 538,200 square ft during the second quarter of this year. This number is compared to total records followed since 1Q2003. This is equivalent to an 11.4% rate of a vacancy during the 2nd quarter of 2020, from 10.2% during the first quarter of this year.
This number is recorded still remains stable and doing well in the 2nd quarter of 2020, but most property specialists and real estate consultants expect a continuous decline in office space rentals during the second half of 2020. This is due to huge effects on the economy in the industry and will cause most renters to give up office spaces which also results in a rising number of vacant properties.
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To be specific, Knight Frank has given their expectation on which exclusive office rental units will be reduced by up to 10-15% on its demand due to the economic performance related to the office space needs and GDP rise in past recessions. As the advanced study has been checked in regard to the economic contraction, it has an estimated 12.6% rate during the second year of 2020.
All these changes are expected to continue until the end of this year as all occupancy units are expected to go down by around 5% or even more. This is due to the rising pressure which results from most changes to happen in the economy including the current industry, as also stated by the head of Research of Knight Frank Singapore, Leonard Tay.
Looking into how it is now, it could also be seen by Cushman and Wakefield (C&W) that there are higher chances for rental renewals compared to additional leases from new clients. Rentals for unit renewals are more stable since most of it for new lease units have shown a large reduction in its demand now.
But even for all this, Wong Xian Yang, the associate director of C&W for Southeast Asia has advised that this may still be dependent on how property owners or landlords would give some perks and offers to brand-new leases in relation to fix and correlate subsidies. This would help how most would react to new lease offers so there would still be a great chance for it to improve and go back to its stability in the future.
On the other hand, office units are also declining for their prices during this second quarter of 2020. It was even marked for its 4th decline in consecutively falling performance since the 3rd quarter of last year. Rate of 4.3% q-o-q was recorded for unit prices located in the Central Region which is far lower compared to how it declined the last 1Q of 2019 which cost was only noted for a decline of 12.9% q-o-q.
All changes and a huge decline in unit prices are heavily affected due to the short-term consequences of office space rentals. As renting office spaces is known to include possible risks like recessions effect and regulations made for social distancing precautions, this would also result in lower demands for office spaces as per Wong.
A total record of 19 caveats was noted for offices in the Central Region compared to the 81 deals closed last 2nd quarter of 2019. The huge decline in sales was related to how the circuit breaker regulations have affected the industry during this period.
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