Singapore’s CBD Grade A Office Rents To Rise By 4.4% In 2022

SINGAPORE – Amidst resilient net absorption of 373,000 sq ft, rents of Grade A office space in the city-state’s central business district (CBD) edged up by 0.5 percent quarter-on-quarter to S$9.64 psf in Q4 2021, according to a new report published by Colliers on Tuesday afternoon (15 February, SGT).

“Leasing demand for CBD Grade A continued on its positive trend in Q4 2021, driven by the expansion of technology and selected financial services firms,” said the real estate consultancy

For the whole of 2022, Colliers expects CBD Grade A office rents in Singapore would increase by 4.4 percent, surpassing the 0.8 percent rental growth for the entirety of 2021.

Vacancy rate is also projected to decline to 3.9 percent by the end of this year. In Q4 2021, CBD Grade A vacancy decreased to 5.0 percent due to a rebound in office leasing demand. One factor behind this is the dearth of CBD Grade A supply entering the market this year, with Guoco and Midtown being the only office developments expected to be completed in 2022.

Aside from that, Colliers revealed that capital values or prices of CBD Grade A office buildings in Singapore rose 5 percent quarter-on-quarter to S$2,560 psf during the last quarter of 2021. At the same time, transaction volumes surged by 3.7 times.

“Demand for CBD Grade A office has been encouraging and is expected to remain resilient in the coming quarters. However, demand for CBD Grade B office remains comparatively muted, and the office rental gap between both segments will inevitably widen. There is now more urgency for the older office buildings to upgrade and refresh their image,” said June Chua, Executive Director and Head of tenant representation at Colliers.

“Colliers Research recommends occupiers proactively conclude final plans for their footprints as the window of opportunity for rental negotiation starts to close. Landlords of ageing office assets should adopt a softer stance in rental negotiations and consider retrofitting/redeveloping their assets to unlock value in the medium to long term. Investors should think creatively in repositioning assets to hit return targets and beat yield compression,” added the real estate consultancy.