A long slump in Singapore's retail, residential and office property markets shows no signs of ending soon as declining occupancy weighs on older marquee sites in the regional financial hub and banks and other key tenants shed staff and look at new and often better options.
In a report this week, Deutsche Bank noted that office rents were down 18 percent from 1Q15 peaks, while capital values were off just 8 percent. That suggested rental yields were down for investors.
Deutsche Bank expected Grade-A office net supply to rise 117 percent this year.
Looking at the segment, Bart Coenraads, the global head for global indirect real estate at Aviva Investors, earlier this week pointed toward the cranes dotting the skyline of Singapore's central business district (CBD) as a sign of the supply continuing to enter the marketplace.
"In addition to that, a number of investment banks have de-staffed as well. There's a lot of shadow space in existing buildings already," he said.
He also pointed to specific deals, such as Julius Baer's decision in the third quarter of last year to move from Asia Square to Marina One.
"Clearly, they're leaving behind space as well. There's a big question mark how the space will all be filled," Coenraads said, adding that rents were falling.
In the fourth quarter, office occupancy fell to 88.9 percent from 89.6 percent in the third quarter, according to government data.
That's a pattern that appeared to show in the recent results of Singapore-listed Keppel Real Estate Investment Trust, which owns partial interests in several office towers in the city-state.
Credit Suisse said in a note Wednesday that the REIT's distribution per unit for 2016 came in below its expectations as rent reversions were down by 9 percent, with management saying it expected further pressure on rents this year.
Aviva expressed concern that Singapore's office property may not compensate investors enough for the risk.
The spread between Singapore's prime office yields and the city-state's 10-year government bond yield has been around a tad under 200 basis points, in line with historical averages, according to data from Aviva Investors. But that paled compared with other regional capitals, with Sydney and Melbourne offering an around 300 basis-point spread, well above historical averages, the data show. Tokyo also offered around 300 basis points, although that's in line with historical averages, and Hong Kong was offering more than 200 basis points, the data show.
Analysts weren't holding out much hope of an office-rent recovery.
"With continual supply pressure in 2017, we reckon rents will continue to soften at least for the first half of 2017," Chua Yang Liang, head of research for Southeast Asia at JLL, said in a note Thursday.
"The weak external economy did not help. It continued to weigh down on the creation of new businesses here resulting in limited new demand," Chua said. "Tenants are very price sensitive and in today's tenant favourable market, landlords maintained a competitive strategy."
Another REIT, Suntec REIT, which owns both Singapore office and retail property, was also showing signs of pressure on yields in its latest results.
"With the expected oversupply of the Singapore office market upon the completion of several new offices, Suntec
REIT's properties may face stiffer competition for its tenants as well as downward pressure on rents," analysts at DBS said in a note on Thursday, noting Suntec REIT owns three office assets in the CBD.
Suntec was also feeling the pressure on the city-state's retail malls.
"With Singapore consumers cutting back on discretionary spending and compared to the initial rents signed at Suntec Mall during more buoyant times, rents at Suntec Mall will likely continue to be under pressure," DBS said, noting the rents were underperforming the manager's initial target.
Other analysts were also pointing to pressure on demand for retail space.
"Amid stiffening competition from online retailing and regional markets, on top of operational challenges such as labour crunch, retailers are expected to continue with their strategy of consolidating and maintaining only profitable outlets," Tay Huey Ying, head of research for Singapore at JLL, said in a note Thursday. "Expansion by retailers will likely remain confined to tried-and-tested established brand names while entrances of luxury goods, fashion and accessories are likely to remain limited."
She also noted that another 169,000 square meters of retail space was expected this year, with another 229,000 next year, which was likely to spur greater competition for tenants.
There were other signs that yields from retail rents might face continued pressure.
Aviva's Coenraads noted he was closely watching the bidding for suburban mall Jurong Point, with the sellers reportedly seeking more than 2 billion Singapore dollars. The Business Times reported earlier this month that two of the three shortlisted bidders have separately offered around S$2.2 billion, which the report estimated would drive the net yield under 4 percent.
While it may get the lion's share of the ink, Singapore's residential sector is actually not nearly as large as its commercial property sector.
Coenraads noted that the introduction of cooling measures, which he called a "very smart move," had dampened residential demand. But he didn't expect a turnaround soon.
"The question is, at what sort of stage will they start letting go of some of the regulation, and I think basically, we need to see further decreases in prices," he said. "I think it's not reflecting yet where the government wants to see prices at this stage."
Private housing prices fell around 3 percent in 2016, based on the price index, according to government data, slowing from 2015's 3.7 percent decline. Prices were down more than 11 percent since they peaked in 2013's third quarter.
Singapore's property prices surged more than 60 percent from 2009 through 2013, propelled by rock-bottom global interest rates and quantitative easing in developed economies that followed the global financial crisis, even as the city-state's government enacted a series of cooling measures to prevent a bubble from forming.
From 2011, Singapore's government imposed a series of cooling measures, including an Additional Buyer's Stamp Duty (ABSD), which adds much as an additional 15 percent to the purchase price for foreign buyers and Singaporeans with more than one property.
It also instituted a Total Debt Servicing Ratio (TDSR), which aimed to ensure that buyers' monthly debt payments do not exceed 60 percent of their income, to keep them from being caught out by a spike in interest rates. Most mortgages in Singapore have adjustable, rather than fixed, rates.
But Coenraads said that if interest rates were to rise quickly – the U.S. Federal Reserve has said it expected to hike rates three times this year – he expected that might spur some deregulation as households would face income headwinds.
Other market watchers, however, did expect the government to begin to ease up on the brakes.
In a separate note on Thursday, DBS said that rising interest rates would have a "cooling" effect on the residential market, and that the government's measures deserved a re-examination.
DBS expected the ABSD would be the first measure to be tweaked, although it only anticipated it would be eased for local home buyers, rather than foreign investors, to prevent speculation.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter