SINGAPORE (EDGEPROP) - Prime office rents in the Raffles Place/Marina Bay precinct inched up 1.2% q-o-q to $10.25 psf per month (pm), extending the 1.7% growth in 2H2021, says a 1Q2022 office report by Knight Frank. This marks a third consecutive quarterly increase, recovering from its trough in the middle of last year. 

See also: CBD Grade-A office rents up by 2.1% q-o-q in 1Q2022: Cushman & Wakefield

“As the Covid-19 situation stabilises and more return to the office, the previously tenant-led leasing market will move towards more balance between landlords and tenants,” the report reads. Occupancy in the Raffles Place/Marina Bay precinct improved by 2.3% q-o-q to 94.1% in the first quarter, aided by the full leasing of CapitaSpring. 

Pre-termination office space increased to around 226,000 sq ft in 1Q2022, as some banks continued to downsize, introducing some 147,000 sq ft of shadow space into the market. Nevertheless, these spaces are expected to be filled rapidly with the easing of Covid-19 restrictions in the workplace. 

“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,” the report adds.

Knight Frank also views the recent URA restrictions on strata-subdivisions of commercial developments in the CBD as in line with the government’s push for “more world-class office spaces”, because single ownership will likely see better management of the buildings.

From a demand standpoint, Singapore offices are expected to capitalise on the geopolitical tensions in Hong Kong as well as the stringent Covid-19 measures there. 

In addition, the expansion of technology and non-bank financial services firms is expected to continue underpinning office demand, led by China tech firms which have been limited by regulations and tensions in other key markets. In the last quarter, China online retailer Shein recently took up 22,000 sq ft of space in MBFC Tower 3, while cryptocurrency firm Yescom Technology (formerly Huobi International) occupied 17,000 sq ft in Millennial Tower.

Meanwhile, despite the uncertainty wrought by the Russian-Ukrainian conflict, the “significant lifting of Covid-19 curbs from March 29 is expected to provide a much-welcome boost”, says Calvin Yeo, head of corporate real estate at Knight Frank. Office leasing demand is expected to remain firm, given the limited good-quality supply of office space in the short term. 

For the whole of 2022, Knight Frank expects rents in the office market to grow by 3% to 5%.

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