SINGAPORE has not been immune to the slowing economic conditions that have permeated globally over the past year, with a softening across many of its sectors, including commercial real estate (CRE). The CRE sector here has been a strong growth sector for several years. Indeed, the government's Property Price Index of office space has generally appreciated since 2010.

This changed in the second quarter of 2015, when cloudy global economic conditions along with a large supply pipeline led to a softening in rents in most CRE segments, particularly offices. The current subdued economic activity has prompted market commentators and analysts to predict a continued downward slide for the sector. In 2016, rents of office spaces in prime districts have been forecast to decline, and capital values are also expected to start to more closely track rents and moderate further in time.

While a cyclical dip is undeniable, the sector nonetheless appears supported by strong demand fundamentals in the longer term, including a steady and continued stream of businesses looking to set up offices in Singapore as well as the growing diversity and flow of inbound investment. While HSBC expects the large impending supply of office spaces to continue to put downward pressure on CRE prices further into 2016, the decline is forecast to be at a moderate 5 per cent.