Subdued economic outlook continue to weigh down on office rents. Latest data by the Urban Redevelopment Authority shows the median rent for Category 1 office space falling 2.7% quarter-on-quarter in 3Q2015 to $10.05 psf per month, after a 2.8% decline in the preceding quarter. URA defines Cat 1 offices as those located in core business areas which are relatively modern or recently refurbished with large floor plate and gross floor area.

Bearish sentiments permeate the banking, financial and oil & gas sectors amid slowdown in the Chinese economy, weak commodity prices and low interest rates. Bank of America, Barclays and Standard Chartered are reportedly reducing staff headcounts.

Although the vacancy rate for Cat 1 offices improved from 10.2% in 2Q to 8.9% in 3Q, demand was led by prime new projects offering attractive rents and other deal sweeteners as well as suburban offices.

Outlook for the office market remains challenging as the sector braces for 5.2 million sq ft (gross) of supply tsunami next year from high-profile projects such as Marina One (2.24 million sq ft), Guoco Tower (1.01 million sq ft) and DUO Tower (689,000 sq ft) (see Table).

Potential supply of major office projects in 2016 and 2017