CBD Office Rents Anticipated To Rise Further

Singapore CBD Office Rents Anticipated To Rise Further

SINGAPORE – Real estate experts expect that rents of office space in the city-state’s central business district (CBD) would increase further after it grew at a faster pace during the first quarter of the year, reported The Business Times on Saturday morning (23 April, SGT).

For instance, CBRE thinks that office rental growth would accelerate further in the coming quarters, with core CBD office rents forecasted to increase by 6.9 percent year-on-year for the whole of 2022.

And as workplace restrictions in Singapore are eased further, CBRE’s Research Head for Southeast Asia Tricia Song believes that office rental enquiries may increase more.

“While hybrid working could keep the overall office demand footprint below pre-pandemic levels, leasing demand is expected to continue, driven by a rapid expansion in demand from agile space, technology and non-bank financial sectors, and limited new supply,” she explained.

Similarly, Edmund Tie’s Research Head Lam Chern Woon is bullish on Singapore’s office leasing prospects amidst rising demand and limited supply. In particular, he expects the rents of prime office space here could rise by 3 percent to 5 percent this year.

On Friday (22 April), the Urban Redevelopment Authority’s (URA) latest statistics showed that office rents in Singapore edged up 1.6 percent quarter-on-quarter in Q1 2022, exceeding the 0.9 percent gain in the preceding quarter.

Cushman & Wakefield’s Research Head Wong Xian Yang pointed out that the office rental growth was led by fringe-area office buildings, where rent climbed 6.1 percent, while those in the central area dropped marginally by 0.9 per cent.

“The fall in central-area office rents could be driven by older office stock that saw lower demand as hybrid work gained traction and the flight to quality continued,” he noted. Wong added that net demand for Downtown Core offices remained negative at -183,000 sq ft, representing the 6th consecutive quarter of negative net demand.

“Nonetheless, the level of negative net demand is considerably lower than the first half of 2021, when net demand had gone below -300,000 sq ft in each of the quarters then.”

Meanwhile, the capital values or the selling price of office space recovered in the latest quarter due to strong interest from investors, while demand from office buyers is also projected to rise for the remainder of 2022.

In fact, URA’s latest statistics showed that office prices in Singapore’s central region increased 4.4 percent in Q1 2022, a turn around from the 1.8 percent dip in the preceding quarter.

Knight Frank Singapore’s Research Head Leonard Tay described the recovery in office prices as “quite dramatic”.

He also revealed that there is healthy demand for strata office space from private wealth and family offices as well as small- and medium-sized enterprises (SMEs) looking to right-size in the technologically enhanced post-COVID era.

“As such, demand for strata office units can be expected to grow in 2022 given the lack of new strata office supply in the medium term, some spillover investor interest from the private residential market as a result of the 16 December 2021 cooling measures, and the recent restriction on strata subdivision in certain corridors of the CBD,” added Tay.

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