SINGAPORE — Prime office rents in Singapore are forecast to drop 14 per cent between end-2015 and end-2019, the second worst among 31 cities worldwide, showed a report by real estate consultancy Knight Frank yesterday.

Besides the large impending supply hitting the market this year and next, demand for prime office space is also undermined by slower economic growth and a lack of support from the thriving technology sector, whose companies are setting up shop outside the Central Business District (CBD).

“Compared to other global cities, in Singapore, the Government provides for business park space, so with the growth of tech firms, we don’t see that growth in the CBD … There’s clear intent in planning principles in Singapore that (the Government) wants to drive clusters like one-north,” said Mr Calvin Yeo, Knight Frank Singapore’s executive director and head of office advisory.

He noted that Google and Apple are among tech companies that have chosen to set up outside the CBD in Singapore. This is in contrast with cities such as Shanghai, where tech companies are contributing to the demand for prime office space and rising rents.

In Knight Frank’s Global Cities: The 2017 Report, Sydney was found to have the best prospects, with prime office rents expected to jump 27.5 per cent between end-2015 and end-2019, while Berlin came in second with a 25 per cent growth forecast. Shanghai was the highest ranked Asian city at sixth place with a 19.2 per cent projected increase in rents. The worst forecast was for Bogota, where rents are expected to fall 17.3 per cent.

The Singapore market is not without bright spots. Firms offering co-working spaces have emerged as a new demand driver in the CBD area, noted a report by Savills.

“Recent examples include the 20,000sqf co-working space on the 12th floor of Capital Tower by a joint venture between CapitaLand and co-working space operator Collective Works,” said the property firm.

But Knight Frank Singapore’s research head Alice Tan said the 6 million sqf of gross floor area of office space coming on stream in 2016 and 2017 will weigh on rentals in the short term. While the decline could moderate from next year onwards, a recovery is not in sight until 2019. LEE YEN NEE