Grade A CBD Office Rents Surpass Pre-COVID Peak In Q3

SINGAPORE – Data from Jones Lang LaSalle (JLL) showed that gross effective rents of Grade A office space in the city-state’s central business district (CBD) edged up by 2.9 percent to S$11.06 psf per month in Q3, reported The Business Times on Wednesday afternoon (28 September, SGT).

Apart from being the highest average rental rate in 18 years, it also exceeds the pre-pandemic peak of S$10.81 psf per month that was seen in Q4 2019. It is also the highest since the S$12.55 psf recorded during the last quarter of 2008.

JLL noted that it only took 18 months for Singapore’s Grade A office market to recover the rental contractions during the COVID-19 pandemic.

“The office leasing market has withstood the pressure of external economic headwinds better than expected,” commented JLL Singapore’s Research Head Tay Huey Ying.

“Net absorption of Grade A CBD office space stayed elevated, coming in just marginally below the 17-quarter high recorded 3 months ago, and way above new supply from the completion of Hub Synergy Point,” she noted.

JLL Singapore’s Head of office leasing and advisory Andrew Tangye also stated that while some office tenants are increasingly growing cautious due to global economic headwinds, Singapore’s office rental market is still benefiting from the tailwind of the economy’s reopening.

“The market activity of the past 9 months proves beyond doubt that corporates regard physical office as a critical component of the work ecosystem, be it hybrid or not,” he added.

Looking ahead, JLL thinks that Grade A CBD office rents could increase by 10 percent for the entirety of 2022, surpassing the 4.3 percent recorded in 2021.

However, “the downcast skies could weigh down demand for office space in 2023 and soften rent growth to within 5 percent,” added JLL’s Tay.