A person walking through the central business district (CBD) may soon see some largely dark office buildings as landlords face the spectre of a weak leasing market this year and the next.
Guoco Tower, which is due to be completed this year, has found tenants for only about 10 per cent of its office space. It has a total office net lettable area (NLA) of 890,000 sq ft.
The commitment level at Duo Tower, which is due to be completed next year, is believed to be about 25 per cent. It has an NLA of about 570,000 sq ft.
Developer M+S also has Marina One that will be finished next year and offer about 1.88 million sq ft of NLA across two office towers.
A deal at Asia Square Tower 1 - put up for sale by BlackRock - may be hard to strike: While occupancy is at about 90 per cent, this could head towards the low 80 per cent by the year end if there are no takers when existing tenants move out.
Landlords this year will contend with a rise in supply even as some tenants cut back on their real estate footprint.
Among tenants from the finance sector, for example, Societe Generale is understood to have given up two floors at One Raffles Quay, although the space has already been taken up by some tenants.
In the oil and gas sector, a firm in exploratory operations that previously leased 20,000 sq ft in Suntec City cut this back to 14,000 sq ft last year and now intends to take up just 4,000 sq ft.
BHP Billiton recently gave up four floors at Marina Bay Financial Centre but these were taken up by LinkedIn and IBM.
Landlords will take heart that there is not too much shadow space - excess space that tenants have leased but wish to sublet - being created for now.
In fact, the amount of shadow space in the CBD Grade A office market fell 28 per cent to about 123,000 sq ft at the end of last year, Cushman & Wakefield estimated.
This could be due to tenants partly subsidising rents for an incoming tenant to fill up the space, with the result that incoming tenants likely get a better deal than if they were to go directly to landlords, said Ms Christine Li, research director at the firm.
Mr Alan Cheong, head of research at Savills Singapore, suggests that the finance and energy markets have been buffeted so badly that real estate is not yet at the top of their managements' minds.
"Many find it easier to jettison staff, which brings about an immediate cost savings... As leases are signed for the medium to long term, it is difficult for them to cut and run."
But when the markets they are in start to stabilise and business continues at lower levels, the companies could re-assess their office space requirement, he added.
Landlords cite the technology, media and telecommunications sector as an area of growth in office demand.
Airbnb has already moved into 158 Cecil Street, expanding from 13,000 sq ft to 30,000 sq ft, while Uber has taken up 20,000 sq ft of space in Mapletree Anson.
"Singapore is still an attractive location for multinational headquarters in the Asia-Pacific... more firms from this sector could set up or relocate their headquarters here," said Ms Li.
Older buildings in submarkets with more upcoming supply are set to come under pressure, Ms Li added.
These include the Shenton Way and Tanjong Pagar area, which apart from Guoco Tower will also have 5 Shenton Way and Robinson Towers completing next year and Frasers Tower in 2018.
As most of the effective supply comes on next year, Savills expects rents this year to decline about 4.4 per cent from last year, with a more significant correction of 11.7 per cent to come next year.
As for strata-titled office space, the amount is low and individual owners seem to have holding power.
There were no new mortgagee sale listings for such space last year, noted Colliers International and DTZ.
This article was first published on February 22, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.