Singapore CBD Grade A Office Vacancy Dipped In Q2

SINGAPORE – The vacancy level of CBD Grade A offices here monitored by Savills slid 0.4 percentage points (ppt) quarter-on-quarter (QoQ) to 6.8 percent in Q2/2022, after an increase of 1.6 ppts in the prior quarter, according to a report published on Wednesday afternoon (3 August, SGT).

During the 2nd quarter, Orchard Road, Marina Bay, and City Hall respectively recorded the lowest vacancy rates of 2.3 percent, 3.7 percent, and 4.4 percent. On the other hand, Tanjong Pagar (8.9 percent), Raffles Place (9.6 percent), and Shenton Way (10.3 percent) saw the highest rates.

Still, Savills noted that the decline in vacancy rates of Grade AAA and Grade AA offices outweighed the increase in vacancy levels of Grade A buildings. With the fall in office vacancy rates, net demand for CBD Grade A offices remained positive for the fourth straight quarter, amounting to 136,000 sq ft in Q2 2022, surpassing the 59,000 sq ft seen in the preceding three-month period.

Moreover, the real estate consultancy revealed that the strong demand for Singapore office space resulted in a quarterly increase in average monthly rents of CBD Grade A offices for the second consecutive quarter. In Q2, it rose 0.4 percent quarter-on-quarter to S$$9.47 psf, but this is slightly lower than the 0.7 percent quarterly gain during the first three months of the year.

Grade A office space in Marina Bay was the most expensive during Q2 at S$12.18 psf, followed by City Hall (S$9.82 psf) and Raffles Place (S$9.66 psf). Conversely, the most affordable were Shenton Way (S$8.73 psf), Tanjong Pagar (S$8.50 psf), and Beach Road/Middle Road (S$7.74 psf).

Savills noted that the increasing recurrent costs and the need for future investment on environmental capital expenditures is prompting office landlords to pass these costs to office tenants, and commercial property owners can do that because new Grade A CBD office supply in 2022 and 2023 is low.

“Although there are economic challenges, with low levels of new supply, rents have been able to rise to offset inflation and future environmental related expenditures,” said Alan Cheon, Executive Director of Savills Research.

Looking ahead, Savills maintained its projection for 2022 that Grade A office rents in Singapore would rise by 3 percent year-on-year.