Singapore CBD Office Rents May Rise 8.4% In 2022
SINGAPORE – Jones Lang LaSalle (JLL) thinks that total demand for office space within the city-state’s central business district (CBD) could exceed office stock next year. Thus, office rents there could expand by at least 8.4 percent in 2022 compared to 4.2 percent this year, reported The Business Times on Friday morning (31 December, SGT).
However, the forecasted doubling in office rental growth assumes that market normalization is not hampered by new COVID variants and no adverse external shocks occur, said JLL’s Research Head Tay Huey Ying on Thursday.
“Underpinned by the expected return to normalisation of more economies, we foresee business expansions to pick up pace while downsizing and cessation to slow further,” she explained.
JLL anticipates that more companies would establish or expand their presence in Singapore, helping to support a growth in office space take up next year.
In terms of office stock, Guoco Midtown is the only Grade A office development expected to enter the market in Singapore’s CBD come 2022. On the other hand, office rental activity has stopped at AXA Tower as it prepares for redevelopment.
Consequently, this would further tighten office supply, dragging down vacancies of Grade A CBD offices from 8.6 percent in Q4 2021 to 7 percent or lower by the end of next year.
Amidst this backdrop, office rental growth could more than double the pace in 2021 and “intensify investors’ interest in Singapore’s office assets and drive capital value growth”, Tay reckons.
For the whole of 2021, JLL revealed that rents of CBD Grade A offices rose 4.2 percent, surpassing its projection of a 6 percent contraction.
In particular, monthly gross effective rents of such commercial properties rose to an average of S$10.23 psf as of the 4th quarter. This is up from S$10.05 psf in Q3 2021 and S$9.81 psf during the same period year ago. The property consultancy noted that office rents here have reached its trough during the first quarter of the year, before the quarterly rental growth accelerated to a 1.8 percent rise during the 4th quarter to record the fastest gain in 11 quarters.
JLL disclosed that the rebound this year in Singapore office rents was driven by a flurry of sales. So far this year, divestments of properties mainly used as office space priced at least S$5 million totalled S$4.5 billion, exceeding the S$2.3 billion seen in 2020.
The biggest deal inked so far this year was the S$1.28 billion sale of One George Street by CapitaLand Integrated Commercial Trust and FWD Group to a joint venture (JV) comprising JPMorgan Global Alternatives and Nuveen Real Estate. The selling price works out to S$2,875 psf based on the office building’s existing net lettable area (NLA) of 445,745 sq ft.
