Grade A Office Rents In Singapore’s CBD Rose 2.1% In Q1

SINGAPORE – CBD Grade A office rents here edged up by 2.1 percent quarter-on-quarter during the first three months of year, surpassing the 1.7 percent quarterly gain during Q4 2021, according to a report published by Cushman & Wakefield (C&W) on Wednesday evening (6 April, SGT).

The rental growth comes as vacancy levels for office space in Singapore’s central business district (CBD) dipped to 4.6 percent in Q1 2022 from 4.9 percent during the preceding quarter.

At the same time, office rents in the city fringe (all grades) and suburbs (all grades) increased marginally by 1.1 percent and 0.7 percent respectively amid stable economic conditions. But while office vacancy in the city fringe fell to 5.5 percent, that in the suburbs rose to 5.7 percent.

“We anticipate a continued recovery for the decentralised office market, given commercial decentralisation activities, spill-over demand from the CBD, and limited new grade A decentralised office supply,” said C&W’s Research Head for Singapore Wong Xian Yang.

“Rochester Commons, the only new Grade A decentralised office development this year, has been mostly pre-committed by Sea Group. The next decentralised Grade A office development, Labrador Tower, will only be completed in 2024,” he added.

Moreover, Wong noted that Singapore’s economic outlook remains stable, with its gross domestic product (GDP) forecasted to grow between 3 percent and 5 percent for the whole of 2022 amidst a re-opening of the global economy and that of the city-state as well.

But while the prospects are clouded by geopolitical developments and the trajectory of the COVID-19 pandemic, Russia’s invasion of Ukraine is not expected to have a direct impact on Singapore’s office market.

“Singapore has a limited presence in Ukraine and Russia, and it does not import many essential supplies from the region,” he explained.

However, inflationary pressures would likely remain elevated because of higher energy prices and supply chain disruptions. In addition, the lockdowns in China, a key trade partner of Singapore, have worsened supply chain disruptions. The confluence of these factors would raise the operating costs of companies and dampen office expansion demand.

Still, more people will be returning to their workplaces here, boosting tenants’ confidence to take up more office space, said Mark Lampard, Head of Commercial Leasing, Singapore at Cushman & Wakefield.

“From 29 March, up to 75 percent of workers will be allowed to return to the office. In all, we are positive on the office outlook given a strong demand for top quality office spaces and a tight supply situation. As such, CBD Grade A office rents are still expected to trend higher at about 5 percent year-on-year in 2022,” he added.