Singapore Office Rents To Continue Upward Trajectory
SINGAPORE – Property experts think that office rents in the city-state’s central business district (CBD) are expected to continue increasing after an excellent performance in Q2 2022, reported The Business Times on Saturday morning (23 July, SGT).
According to the 2nd Quarter 2022 real estate statistics published by the Urban Redevelopment Authority (URA) on Friday morning, Singapore office rents rose 2.4 percent quarter-on-quarter in Q2, surpassing the 1.6 percent uptick in Q1.
Looking ahead, Knight Frank’s Research Head Leonard Tay expects office rents here to hold steady for the rest of the year and in 2023 despite a possible economic recession. This is on the back of Singapore’s open business environment with clear and transparent rules, as well as a “flight to safety” by companies, private wealth, and multinational corporations (MNC) impacted by tensions in other parts of the globe.
“Office occupancy levels and rents are also expected to be supported by the tight supply of good-quality spaces at globally competitive rates in Singapore,” noted Tay, who maintained a forecast that Singapore office rents would rise by 3 percent to 5 percent for the entirety of 2022.
Jones Lang LaSalle’s (JLL) Research Head Tay Huey Ying noted that office occupier confidence improved thanks to the Singapore government’s quick and extensive easing of COVID-19 restrictions. Office space downsizing slowed and more companies expanded after 100 percent of staff were allowed to work from the office from 26 April 2022.
At the same time, older office properties continue to be taken out of the market, as the redevelopment wave continues. She noted that Q2 marked the third consecutive quarter of falling islandwide office supply, resulting in a tightening of supply vis-à-vis demand.
Despite early signs that global economic issues are beginning to have an effect on property decisions of some tenants, CBD Grade A gross effective rents for the whole of 2022 could still double from the 4.3 percent recorded in 2021, as it has already increased by 5 percent during the first half of the year.
Meanwhile, office prices dropped by 5.1 percent quarter-on-quarter in Q2, reversing the 4.4 percent growth in Q1.
Edmund Tie’s Research Head Lam Chern Woon said the fall in office prices contrasts with the rising office rents, and this reflects the uptrend in office capitalisation rates that is being fueled by the present interest rate hike cycle.
“Given the limited supply and sustained demand, central region office rents are likely to continue trending northwards, driven by high rental growth and occupancy rates, although the softening economic outlook could temper some business and corporate real estate plans,” added Lam.