Singapore CBD Grade A Office Rental Growth Could Double In 2022
SINGAPORE – Jones Lang LaSalle’s (JLL) Research Head here Tay Huey Ying believes there is a possibility that the rental growth of Grade A office space in the city-state’s central business district could double this year from the 4.3 percent gain seen in 2021, reported The Business Times on Wednesday noon (29 June, SGT).
According to the property consultancy’s latest data, Grade A CBD office rents edged up 2.7 percent from S$10.46 in the prior quarter to S$10.74 psf per month in Q2. This means the average Singapore office rent has risen for the fifth consecutive quarter and is now just 0.6 percent below the pre-pandemic peak of S$10.81 psf in Q4 2019.
Among the four CBD submarkets monitored by JLL, Marina Bay saw the highest quarterly office rental growth of 3.4 percent due to its “relatively new and good quality” office buildings.
Tay credited Q2’s strong office rental growth to an improvement in business confidence in Singapore after 100 percent of workers were permitted to return to their office from 26 April 2022.
“Upward pressure on rents should persist and Grade A CBD office rents should breach the pre-pandemic peak of S$10.81 psf per month within the next quarter given the 0.6 percent gap as of Q2 2022,” forecasted Tay.
Moreover, she highlighted that office expansions and new set ups “far overshadowed” property downsizing. This resulted in net absorption of CBD Grade A office space hitting the highest in 17 quarters during Q2 2022.
Looking ahead, JLL said the availability of office space in Singapore CBD remains tight, particularly good quality office space, with large space occupant finding it “especially difficult” to find suitable alternative premises. This would offset the geopolitical and economic uncertainties that could negatively impact demand for office space in the second half of this year.
“The fast rising rents and tight supply have also encouraged more occupiers to commit to forward leases to lock in space and rents. Over the quarter, this helped to drive up pre-commitment rates for Guoco Midtown and IOI Central Boulevard Towers,” noted Andrew Tangye, Head of office leasing and advisory at JLL Singapore.
Meanwhile, initial data compiled by JLL showed S$4.7 billion worth of Singapore office properties have changed hands as of 28 June 2022, including the sale of Westgate Tower. In comparison, the entirety of 2021 recorded S$5.15 billion worth of office deals, down from the S$7.6 billion registered before the pandemic in 2019.
The data only include transactions involving a minimum value of S$5 million and projects whose office component make up at least 80 percent of the area.