In the shadow of peaking markets

ONE look at the lunchtime queues in the Market Street Hawker Centre, and it would appear that the CBD is firmly back in business. Office workers are back in their gleaming glass-clad buildings. Raffles Place is bustling.

Singapore’s office market is far from distressed, but pockets of weakness are opening up in prime Grade A CBD space. Rents flattened in the second quarter, with more shadow space emerging and some landlords reportedly coming down on rates. The next six months could see office rents in correction mode, a JLL report said.

Current estimates of shadow space put the volume of potentially vacant floor area at around 600,000 square feet. That’s now competing with new and upcoming office space for tenants. It’s still being paid for, but shadow space puts pressure on office landlords to fill a hole that will open up when their current tenants opt not to renew their leases. A large chunk of such space is being released by occupiers in the newly cost-conscious tech sector.