Singapore office rents to rebound end-2017, CapitaLand Reit says

[SINGAPORE] Singapore's office rents will remain "a little soft" in 2017 and may pick up only at the end of the year when the amount of new supply of space shrinks, according to CapitaLand Commercial Trust, one of the country's biggest landlords.

About 2.3 million square feet of space were added this year, driving rents down by 15 per cent, said Lynette Leong, chief executive office of the real estate trust's manager. Less than 500,000 square feet are being planned annually starting in 2018, with no supply in sight from 2020, she said in an interview with Bloomberg Television on Tuesday.

"Given that there's still some new supply coming on stream next year, we foresee that rents will remain a little soft," Ms Leong said. "However, it should recover by the end of the year given that there's very little new supply over the years ahead."

Office rents in the city's central area fell for the past six quarters, according to data from the Urban Redevelopment Authority, matching the longest stretch of declines since the global financial crisis as banks reduce their workforce.

The period of lower supply from 2018-2019 will help the office market recover, Derrick Heng, an analyst at Maybank Kim Eng, said by phone.

"Our call is that there will be a bottom between late 2017 and early 2018 and rents will recover beyond that."

CapitaLand Commercial shares have gained 11 per cent this year, compared with the 2.7 per cent increase on the city-state's real estate investment trust index tracking 32 stocks. The Reit that's partly owned by CapitaLand Ltd, South-east Asia's biggest developer, owns buildings such as Capital Tower and CapitaGreen in the city's financial district.

"Singapore is not just reliant on the financial services and banks," Ms Leong said. 'There are other sectors that have become more active, some examples are technology companies - we've got the Facebooks and Amazons of this world."

The trust is planning to redevelop a parking structure called Golden Shoe Car Park in the financial district into an office building, where it will add 1 million square feet of space in 2021.

"We believe that will be the next wave of the office-market cycle," she said.

BLOOMBERG