Singapore CBD Grade A office rents may rise twice as quickly in 2022, say real estate experts

Overall demand for Grade A office space in the Central Business District (CBD) could outpace supply next year and thus fuel rental growth that is at least double the 4.2 per cent increase in 2021, said JLL Singapore.

That is assuming market normalisation is not derailed by new Covid-19 variants and barring adverse external shocks, noted the firm's head of research and consultancy Tay Huey Ying on Thursday (Dec 30).

"Underpinned by the expected return to normalisation of more economies, we foresee business expansions to pick up pace while downsizing and cessation to slow further," she added.

More companies are also expected to set up shop or strengthen their presence in Singapore, which should support an increase in office demand in 2022.

On the supply front, Guoco Midtown is the only Grade A office project expected to come on stream in the CBD next year, Ms Tay said. At the same time, leasing activity has ceased at AXA Tower as it readies for redevelopment.

JLL expects this to further tighten supply, reducing Grade A CBD office vacancies to 7 per cent or lower by the end of 2022, down from 8.6 per cent in Q4 2021.

[[nid:558387]]

Against this backdrop, rental growth could more than double the pace in 2021 and "intensify investors' interest in Singapore's office assets and drive capital value growth", Ms Tay noted.

Meanwhile, Cushman & Wakefield projects a 4.6 per cent increase in rents of CBD Grade A offices next year, with Singapore poised to outperform the broader Asia-Pacific market. In the city-state, the balance of power is "shifting back towards landlords", the firm said.

This comes amid resurgent office demand, tight new supply and the reopening of the global economy, said Wong Xian Yang, head of research for Singapore at Cushman & Wakefield.

He also expects the amount of co-working space within the CBD Grade A office market to grow "substantially" in 2022 with the completion of asset enhancement works at 21 Collyer Quay, after having reached 1.7 million square feet (sq ft) or 5.5 per cent of total CBD Grade A office stock thus far.

Mark Lampard, executive director and head of Singapore commercial leasing at Cushman & Wakefield, noted that the country's thriving tech and finance ecosystem continues to have a healthy appetite for office space as they expand headcounts.

[[nid:505123]]

JLL highlighted the uneven recovery of the Republic's office leasing market. Newer, greener and better-quality assets have been more sought-after and thus led in rental growth. As employees return to the office, demand for greener, more sustainable spaces and healthy working environments has been amplified and "are now of paramount concern", Ms Tay noted.

She added that this has underpinned the robust take-up rates for newly completed projects, as well as the healthy absorption of space that was given up in good-quality developments by tenants following space-rationalisation exercises.

For example, Sumitomo Mitsui Banking Corp reportedly took up close to 70,000 sq ft of space at the newly completed CapitaSpring. At One Raffles Quay, L'Oreal moved into a 67,000 square foot office, which was released by UBS when the latter relocated to 9 Penang Road. CGS-CIMB Securities also recently relocated to about 38,000 sq ft at Marina Bay Financial Centre Tower 2 that used to be occupied by Standard Chartered Bank.