Singapore Office Rents Expected To Rise

Singapore Office Rents Expected To Rise By 3-5% In 2022

SINGAPORE – Property consultancy Knight Frank has forecasted that office rents in the city-state would increase by between 3 percent and 5 percent for the entirety of 2022, reported The Edge on Thursday noon (14 April, SGT).

Despite the uncertainty caused by Russia’s invasion of Ukraine, Knight Frank Singapore’s Head of corporate real estate Calvin Yeo said the “significant lifting of COVID-19 curbs from 29 March is expected to provide a much-welcome boost.”

Rental demand for office space here is expected to remain healthy due to the limited availability of good-quality workspace over the short term, he noted.

Meanwhile, the latest report from Knight Frank showed that monthly prime office rents in Singapore’s Raffles Place/Marina Bay precinct rose marginally by 1.2 percent to S$10.25 psf on a quarterly basis in Q1 2022.

This marks the 3rd straight quarterly rental growth after it hit rock-bottom during the middle of 2021, and this extended the 1.7 percent gain seen during the second half of last year.

Moreover, the occupancy rate in the Raffles Place/Marina Bay precinct climbed by 2.3 percentage points quarter-on-quarter to 94.1 percent in Q1 2022, supported by the full occupancy of CapitaSpring.

“As the COVID-19 situation stabilises and more people return to the office, the previously tenant-led leasing market will move towards more balance between landlords and tenants,” stated the report.

However, the amount of office space pre-terminated in Singapore rose to about 226,000 sq ft during the first quarter of the year, as some financial firms continued to downsize, adding around 147,000 sq ft of shadow space into the office market. Still, these commercial spaces are expected to be occupied quickly amidst the relaxation of COVID-19 curbs.

“Quality office space will become increasingly paramount, as employees now expect work environments to be more conductive than homes in order to induce a return to physical offices,” noted the report.

Additionally, the expansion of tech firms and non-bank financial services companies is expected to continue to drive office space demand in Singapore, led by Chinese tech firms which are fleeing from regulations and tensions in other key markets.

For example, China online retailer Shein recently leased 22,000 sq ft of space in MBFC Tower 3, while crypto company Yescom Technology (formerly Huobi International) took up 17,000 sq ft in Millennial Tower. Both rental deals occurred in Q1 2022.

Office spaces in the city-state are also expected to benefit from the geopolitical tensions in Hong Kong as well as the draconian COVID-19 measures in the Chinese territory.

Furthermore, Knight Frank believes that the recent ban on strata-subdivisions of commercial properties within select areas in Singapore’s central business district (CBD) is in accordance with the government’s goal to have “more world-class office spaces” as single ownership will likely result in better management of office buildings.

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