JLL estimates that close to 4 million sq ft of new office space is expected to complete in Singapore in 2016, a historical high since 1997, and exceeding the 10-year average annual island-wide demand of 1.5 million sq ft. The large pipeline in 2016 thus poses some concerns for the market.
With more than half the supply pipeline in 2016 – almost 2.5 million sq ft – attributed to a single office space project jointly developed by the Singapore and Malaysian governments following a land-swap deal in 2010, the vacancy level in the CBD could rise.
However, from the chart depicting the upcoming completions from 2014 to 2017, it should be noted that the Singapore office market is expected to face a supply drought in 2015 and 2017. These periods of limited new supply could thus provide some respite from a potential oversupply situation in 2016, should the construction duration of the other projects quicken or be delayed.
Already, several office developers have reportedly been observed to make regular revisions to the target completion dates of their projects, even when developments are well into their final phase of development. Some examples in recent years include MND Building, which was completed earlier than initially expected, and Orchard Gateway that saw its initial 2013 target completion delayed to 2014.
With the bulk of the supply pipeline being in the CBD, the market is also likely to experience a quicker take-up due to its prime commercial location and better office specifications that are available to office occupiers. Along with efforts by the government to transform the CBD to include more lifestyle amenities, these factors could thus support the Singapore office market in mitigating the large oversupply situation in 2016.
About the author
Cedric Chng is the Senior Research Analyst for JLL, based in Singapore.