Singapore Grade A Office Rents Edge Up

Singapore Grade A Office Rents Edge Up By 0.9% In Q4 2022

SINGAPORE – The latest data from Colliers show that the average gross effective rents of Premium and Grade A office space in the city-state’s central business district (CBD) increased by 0.9 percent quarter-on-quarter to S$11.40 psf per month in Q4 2022, reported The Edge on Friday afternoon (6 January, SGT).

“It was observed that rental growth in this segment was driven by the Grade A office submarket (consisting of relatively newer and higher-quality buildings from the Raffles Place/New Downtown submarkets),” stated the real estate consultancy.

While the figure is lower than the 2.7 percent quarterly growth recorded in Q3 2022, it pushed the full-year office rental growth for Premium and Grade A office space in Singapore’s CBD to 5.9 percent, the highest gain since 2019 as per Colliers’ record.

In the fringe CBD, the average gross effective rents of Grade A office space rose by 1.45 percent quarter-on-quarter in Q4 2022, pushing up the whole-year growth to 4.5 percent.

Among the submarkets, Beach Road / Bug registered the highest office rental growth for both quarterly and annual figures, at 6.7 percent and 9.5 percent respectively. One reason for the strong rental growth was the inclusion of Guoco Midtown to this submarket.

Meanwhile, the average capital values of Premium and Grade A office space in Singapore’s core CBD inched up by 1.7 percent quarter-on-quarter to S$3,050 psf in Q4 2022 thanks to positive rental growth and tight office stock.

“As both office rents and capital values rose in tandem, net yields remained flat, at around 3.5 percent,” noted Colliers.

However, the property consultancy forecasted that rental growth of Premium and Grade A office space in the core CBD would slow down in 2023, albeit office rents will still be supported by the tight office supply

“We expect full-year 2023 rental growth for the core CBD Premium & Grade A segment to ease to between 2 to 3 percent year-on-year”.

“It is likely to remain a landlord’s market for the next few quarters due to the tight supply situation, with most maintaining their rents. However, with leasing activity slowing, and should there be a sharp downturn in economic conditions, landlords might have to start prioritising occupancy and offer more competitive incentives and/or rents,” added Colliers.

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