A STUDY OF THE CAUSES AND POSSIBLE SOLUTIONS OF OVERSUPPLY OF OFFICE SPACE IN THE 1980S

Abstract

In Singapore, the tendency of developers to rely on market sentiments and the lack of adequate and accurate real estate statistics, have resulted in a rather speculative and volatile pattern for the office market. This was evident in the boom period starting from 1979 when rapid construction and hectic building activity was observed. The boom proved to be short-lived as it lasted only three years before an oversupply situation was reached. With demand not keeping pace with the increase in supply, the property market is presently in the doldrums. Purchasers and tenants have a wide range of choices of office space in and out of the Central Business District area, resulting in a buyers' market. Consequently, competitive rates for rentals and sale prices coupled with 'giveaways' or rent concessions are offered to secure and attract occupiers to fill up the buildings. However, in this transition period for Singapore, the price mechanism does not work well. Based on a historical annual take-up rate of 100,000 sq m, it is evident that unless there is a concerted effort by both public and private sectors to adopt more realistic and flexible measures to reduce the imbalance of demand and supply, the cumulative surplus of office space will continue. Despite this gloomy scenario, however, the authoress believes that, Singapore, being a small economy would be able to adapt to the changing economic conditions, and adjust to the pressures imposed, both internal and external.