Prime office rents chart fourth consecutive quarter of increase in 2Q2022

By Atiqah Mokhtar / EdgeProp Singapore | July 18, 2022 7:00 PM SGT
Prime grade office rents in the Raffles Place and Marina Bay precinct increased another 1.1% q-o-q in 2Q2022 (Picture: Albert Chua/The Edge Singapore)
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SINGAPORE (EDGEPROP) - Prime office rents in Singapore continued to hold firm in the second quarter of the year. According to data compiled by Knight Frank, prime grade office rents in the Raffles Place and Marina Bay precinct increased 1.1% q-o-q in 2Q2022, averaging at $10.36 psf per month. This brought rental growth to 2.3% for 1H2022. It also marks a fourth consecutive quarter of increase, with rents growing 3.8% since they bottomed out in 3Q2021.
Occupancy levels in the Raffles Place and Marina Bay precinct increased 1.5 percentage points in 2Q2022 to reach 95.4%, supported by limited supply.
average office rentals - EDGEPROP SINGAPORE
Knight Frank says demand for prime office space in Singapore continued to be supported by a flight to safety by private wealth, corporates and MNCs in other parts of Asia affected by stringent pandemic restrictions. “As a case-in-point, the number of family offices was reported to have more than doubled from 203 in 2020 to 453 in 2021, with about 143 new family offices set up in Singapore from January to April 2022, according to data from Handshakes,” the report adds.
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In addition, Knight Frank highlights that while some tech companies - including Shopee and Crypto.com - have started shrinking headcount in Singapore in response to falling valuations and rising inflation, other tech heavyweights continue to show signs of expansion. “Meta is reported to be in advanced talks to lease as an anchor tenant, while Amazon is understood to have leased about 369,000 sq ft at the upcoming IOI Central Boulevard Towers,” the report adds.
Knight Frank believes the sustained demand, coupled with the tight supply of good-quality office space, will support Singapore office rents in the face of looming headwinds over the next six to 12 months due to global inflation, supply chain disruptions and rising interest rates. The firm is forecasting office rents to grow between 3% and 5% for the whole of 2022.
Nonetheless, it also cautions against worsening macroeconomic risks. “If a recession or an extended period of weakness hits global economies, the impact will lead to an inevitable cascade on the overall business climate in Singapore and consequently the office market,” the report states.
Meanwhile, in its 2Q2022 office market report, Colliers highlights that rising operational costs may prompt office landlords to pass on some of the cost burden to occupiers in the form of higher service charges, further supporting higher rents. Colliers is forecasting full-year growth for Core CBD premium and Grade-A office rents to be in the range of 5% to 7% in 2022.
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Bastiaan van Beijsterveldt, executive director and head of occupier services, Singapore, at Colliers notes that demand for quality office premises remains underpinned by companies in the technology, financial services and energy sectors, as well as asset management and legal companies.
In addition, he highlights that the increasing adoption of ESG regulation among companies continues to support leasing activity. “Despite the trend of moving towards a hybrid work arrangement, we have observed that space take-up continued to outpace workplace reduction, as occupiers seek newer buildings with green credentials, efficient specifications, and smart features,” he adds.
On the investment front, Colliers’ report states that the average imputed capital value for Core CBD premium and Grade-A offices remained flat at $3,000 psf in 2Q2022, with yields maintaining at around 3.5%. The firm anticipates Singapore will remain a hotspot for investors seeking value-added real opportunities in the coming months, backed by favourable market dynamics and the country’s safe-haven status amid geopolitical uncertainties.
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