CBD Grade A office rents reach turning point in 2Q2021: Colliers
By Timothy Tay
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - In its latest report on the Singapore office market, Colliers says that the CBD Grade A office market is expected to turnaround in 2H2021. This forecast comes as CBD Grade A rents stabilised in 2Q2021, declining just 0.1% q-o-q to $9.52 psf despite negative net absorption that resulted in a higher vacancy rate during the period. (See also: The future CBD: Finding the right formula for live, work and play)
“We believe CBD Grade A rents are hitting a turning point and expect a recovery in H2 2021 supported by strong economic growth and potential COVID-19 easing measures,” says June Chua. executive director and head of tenant representation at Colliers. She adds that occupiers should take the opportunity to lock in leases early before rents climb in the coming quarters.
Demand for CBD Grade A office space is driven by technology companies. Twitter expanded by taking up an additional 22,00 sq ft at CapitaGreen. IWG’s Regus also took up 22,000 sq ft at PLUS building, while JustCo announced its contract to manage 35,000 sq ft of office space at The Metropolis Tower from 1Q2022.
But CBD Grade A vacancy still expanded to 5.6% in 2Q2021 from 5.0% in the previous quarter. Grade B vacancy rates also rose to 9.3% as the submarket was dragged down by relatively poorer performance in the Shenton Way/Tanjong Pagar area as tenants of Fuji Xerox Tower relocated to make way for the office buildings redevelopment plan.
“Overall vacancy deteriorated in Q2 2021, as businesses continue to rationalise real space needs and seek value space options,” says Chua. “We expect vacancy to moderate to 5.5% by end-2021 and benign supply to keep vacancy rates at 5.0% or below.”
In 2Q2021, investment sales volumes rose 51.5% q-o-q and reflected investors appetite for high-quality freehold or premium and Grade A office buildings in Singapore, says Colliers.
Notable transactions include the acquisition of freehold office building 108 Robinson by PGIM Real Estate from Sin Capital Group; Suntec REIT’s divestment of its 30% stake in 9 Penang Road to Haiyi Holdings; and Sun Venture’s acquisition of a 40% stake in Westgate Tower in a stake swap deal with Low Keng Huat.
“Over the next few years, we remain optimistic for deal volumes on a favourable interest rate outlook and capital allocation to Asia's key gateway cities,” says Ling Wei Kong, senior director, capital markets and investment services in Singapore at Colliers.
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