Office rents to surpass pre-pandemic peak in 3Q2022: JLL

By Hailey Yu / EdgeProp Singapore | June 29, 2022 4:10 PM SGT
The Marina Bay sub-market clocked the highest q-o-q growth in rents in 2Q2022 at 3.4%, underpinned by the continued flight-to-quality trend driven by a growing emphasis on employee wellness and health. (Credit: JLL)
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SINGAPORE (EDGEPROP) - Grade A office rents in the CBD grew by 2.7% q-o-q in 2Q2022 to reach $10.74 psf per month, according to a JLL office report released on June 29. This marks a fifth consecutive quarter of growth, as well as the largest growth since rents rebounded in 2Q2021.
Office rents have now recovered to just 0.6% below the pre-pandemic peak of $10.81 psf, according to JLL.
The strong performance during the quarter was underpinned by rising business confidence and the relaxation of safe management measures, as all employees were allowed to return to the workplace from April 26.
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“Expansions and new set-ups far overshadowed workplace downsizing, leading to 2Q2022 net absorption of CBD Grade A office space — at 0.6 million sq ft — reaching the highest in 17 quarters, notes Tay Huey Ying, JLL Singapore’s head of research and consultancy. To that end, office vacancy rates fell by 1.8 percentage points to 6.8%
The Marina Bay sub-market clocked the highest q-o-q growth in rents in 2Q2022 at 3.4%, underpinned by the continued flight-to-quality trend driven by a growing emphasis on employee wellness and health.
Andrew Tangye, head of office leasing and advisory at JLL, highlights that the tightening supply and rising rents for quality CBD office space are prompting more occupiers to commit to forward leases to lock in space and rents. This drove up pre-commitment rates for Guoco Midtown, scheduled to be completed at the end of 2022, and IOI Central Boulevard Towers, scheduled to be completed by October 2023.
Looking ahead, JLL expects office rents to further grow in the second half of the year, although Tay cautions that geopolitical and economic uncertainties could dampen occupier demand and moderate growth. Nonetheless, given the tight supply, she anticipates rents could breach the pre-pandemic peak of $10.82 psf pm within the next quarter, while full-year rental growth could potentially double the 4.3% clocked in 2021.
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“Gross rents are also under upward pressure from inflationary costs faced by landlords,” Tangye adds.
On the capital markets front, the positive office leasing market activity has sustained demand for office assets amid current global conditions, notes Ting Lim, JLL Singapore’s head of capital markets.
Investors have committed a total of $4.7 billion into Singapore office assets in 1H2022, just 8.6% short of the $5.2 billion invested for the whole of 2021. JLL highlights that office investment deals in 2Q2022 were driven by assets outside the CBD, a deviation from past trends. A total of $2.5 billion in 2Q2022 office transactions were for assets outside the CBD, representing close to 97% of total office investment this quarter.
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