BMI View: Singapore is currently stuck in a growth rut. Uneven economic activity and a weak jobs marketare having ramifications for the commercial property sector. Demand is falling for both prime andsubprime assets as occupiers take stock of the situation, and rental rates across the market are expected towitness decline over 2017.
Real GDP growth in Singapore will sit at 1.9% over 2017, buoyed by decent performance in themanufacturing industry and a gradual pick-up in services activity. However, the figure represents a marginal0.1% y-o-y decline from 2016, which we attribute to structural challenges and poor labour marketconditions. As a result, the commercial property sector has been subject to falling occupier demand, andrental rates are forecasted to come under downward pressure in each of the sub-sectors we cover.
Office occupiers are taking consideration of the subdued jobs market and reducing spending on expansionand development activity, as the talent pool shrinks. Tenants in the market are choosing to wait for theintroduction of new quality supply, Marina One and UIC building both due in H217, instead of undergoingexpansion or costly new development projects. The new supply to the market will add to glut concerns,particularly as occupiers relocate to prime nodes from secondary markets, pushing up vacancies and addingfurther downsides to asking rents.