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Singapore will see vacancies in Grade A buildings increase over the next two years, as the pursuit by upcoming and newer buildings to secure tenants continued to gain momentum in the past two quarters when several established tenants from Grade A buildings take flight to the so-called “Grade A plus” quality buildings, Knight Frank’s latest report revealed.

“Competition for tenants will be rife, particularly among buildings vying to backfill vacancies from tenants relocating to quality over the upcoming quarters,” it said.

With this, Knight Frank expects a two-tiered performance in the prime office market, wherein a greater divergence in rental and occupancy performance may be seen.

According to the property consultancy, Grade A offices here are expected to post larger occupancy and rental declines compared to their Grade A+ counterparts.

In fact, in Q3 2016, Grade A office space in the Raffles Place / Marina Bay district registered the largest quarter-on-quarter rental decline of 2.9 percent, while Grade A+ office space within the area saw a slightly moderate rental decline of 2.1 percent quarter-on-quarter.

Looking ahead, Knight Frank expects average office rents to continue the downward movement, before bottoming out in 2018.

Sources: CommercialGuru, Sep 27, 2016

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