Despite higher vacancy rates, office rents and prices in Singapore’s Central Region improve in 2Q2021

SINGAPORE (EDGEPROP) - Despite rising vacancy rates, office rents in Singapore’s Central Region rose by 1.3% q-o-q in 2Q2021, while office prices in the Central Region turned positive, increasing by 0.9% q-o-q after a decline of two straight quarters, according to URA data. (See also: Asia Pacific workers likely to return to the office, sentiments show)

Year to date, office rents in the Central Region have rebounded by 4.6%, compared to the contraction of 0.8% over the same period as at 2Q2020.

Most of the leasing transactions comprised renewals and relocations, observed Tricia Song, head of research, Southeast Asia, CBRE. “Key demand drivers were confined to the technology and financial services sectors, and to a lesser degree, transport & storage, and energy & commodities firms,” she notes.

Tech and wealth management firms are now taking over CBD Grade A office spaces vacated by banks. Asset management firm Capital International expanded to 58,000 sq ft of former UBS space in One Raffles Quay North Tower in 1Q2021. In 2H2020, Amazon also leased 90,000 sq ft of office space in Asia Square Tower 1 that was vacated by Citigroup

“Increasing practice with repeated regressions to more restrictive postures, growing familiarity with work-from-home (WFH) measures, adaptive practices, and a better appreciation of the pandemic era need for office space, have given corporates the confidence to continue to operate or even expand in the business node of Singapore,” says Leonard Tay, head of research, Knight Frank Singapore.

JLL attributes rent growth over the quarter to improved leasing activity, especially in “better quality, newer and green office buildings”. To date, over 70% of the 0.8 million sq ft of office space in projects completing in 2021, namely Afro-Asia and the CapitaSpring, have been taken up, notes Tay Huey Ying, head of research and consultancy at JLL, Singapore.

Overall office vacancy rates rose to 12.6%, as net demand remained negative at –248,000 sq ft q-o-q. This is attributed to the Downtown Core that holds almost half (47.8%) of the islandwide office stock, notes Wong Xian Yang, head of research, Singapore, Cushman & Wakefield (C&W).

Looking ahead, consultants expect the office market to recover in the second half of the year. “Office rents in the Central Area are poised to lead market growth, driven by tech and wealth management firms as well as limited short-term new higher-grade supply that could face further construction delays,” says Wong.

“CapitaSpring and Guoco Midtown, which will both contribute to the bulk of new higher-grade office supply between 2H2021 and 2022, have seen strong pre-commitments and active negotiations respectively.”