Singapore Office Leasing To Double This Year
SINGAPORE – Property consultancy CBRE expects office take-up here would surge by about two-fold thanks to solid positive net absorption during the 3rd quarter that has resulted in office rents exceeding pre-pandemic levels, reported RETalk Asia on Wednesday (12 October, SGT).
During the 1st three quarters of the year, office leasing in Singapore hit 0.56 million sq ft, surpassing the 0.32 million sq ft recorded for the whole of 2021.
Key demand drivers were expansions by technology companies like ByteDance, coworking space operators, and non-banking financial firms, which leased a substantial amount of secondary office space in the city-state’s core central business district (CBD). New rental pre-commitments at upcoming developments such as in the Central Boulevard Towers and Guoco Midtown were also signed in Q3 2022.
Moreover, occupants displaced by office buildings undergoing redevelopments, like Robinson Point and Clifford Centre also helped contribute to a broad-based recovery in Singapore’s office market. In fact, overall office vacancy dipped further to 4.9 percent during the third quarter of the year from the prior high of 6.8 percent in Q3 2021. Even though hybrid work arrangements will likely remain, total office leasing from renewals, expansions, and new tenants has been resilient in the last 3 quarters.
Google’s Mobility Index also showed that office footfall in the city-state has recovered steadily since all employees were allowed to return to their workplace since 26 April 2022.
“The Singapore office sector has proven its resilience with strong occupier demand for well-located, high-quality buildings,” commented CBRE’s Co-head of Office Services here David McKellar.
“With the return to office in full swing and more companies organising physical activities at the workplace to encourage employees to come back, the CBD is regaining much of its former vitality and buzz. This is a testament that the physical office still plays an integral role in the workplace ecosystem, especially when it has evolved into a consideration in attracting and retaining talent.”
CBRE data also revealed that average gross effective rents for Grade A office space in Singapore’s core CBD edged up by 2.7 percent to $11.60 psf per month in Q3 2022 on a quarterly basis. This marked the 6th straight quarter of growth, with the rental rate exceeding the pre-COVID peak of $11.55 psf per month in Q4 2019. It was also the highest since the $12.30 psf per month recorded in Q1 2009.
Looking ahead, the property consultancy expects rents of Grade A office space in Singapore’s core CBD could rise by 8 percent to 9 percent for the whole of 2022, potentially outpacing the 3.8 percent rental growth seen in 2021.
“Going forward, rising global macroeconomic headwinds and a tech sector consolidation could weigh on demand and rental growth in 2023. Nonetheless, with a limited new supply beyond 2023, and barring a sustained economic recession, rental growth is likely to remain positive,” added CBRE’s Research Head for Southeast Asia Tricia Song.
