Office rents up 2.4% in 2Q2022 on return-to-office momentum
Office rents in the Main region expanded by 2.4% q-o-q in the second quarter, according to data published by URA on July 22. This is more than the 1.6% increase reported in the previous quarter as well as registers a 3rd consecutive quarter of expansion.
“This favorable take-up was most likely contributed by variation task, in addition to brand-new sets up in the lawful sector and non-bank financial institutions,” remarks Tricia Song, CBRE head of research, Singapore and Southeast Asia. Song includes there was even a decline of 473,612 sq ft in office stock, likely as a result of the removal of AXA Tower as it started demolition jobs, which additionally supported lower vacancy rates.
However, she anticipates full-year growth for CBD Grade A gross efficient rents could still double the 4.3% appeared 2021, given that they have currently increased by 5% in the first part of the year.
Leonard Tay, head of research study at Knight Frank Singapore, thinks that office rents will certainly hold firm despite a feasible recession, backed by necessity driven by the “flight to safety” to Singapore by exclusive well-off, corporates as well as MNCs. Knight Frank maintains a projection of 3% to 5% growth in leas for the entire of 2022.
The islandwide workplace openings rate decreased by 0.8 percentage indicate 12%, driven by good net absorption of 258,334 sq ft in 2Q2022. This marks a reversal after 5 consecutive quarters of negative net absorption.
Lam Chern Woon, head of study and consulting at Edmund Tie, highlights that noteworthy leasing activity in 2Q2022 includes Amazon’s reported take-up of 369,000 sq ft of space at the upcoming IOI Central Boulevard Towers and also Blackstone’s relocation from Tower 2 to Tower 1 at Marina Bay Financial Centre, doubling its workplace footprint. The upcoming Guoco Midtown property additionally got grip in leasing undertaking throughout the quarter, with tenants like ConocoPhillips as well as Swiss Re coming on board.
Catherin He, head of study, Singapore at Colliers, mentions that the rental growth was broad-based, with typical rental fees of both Category 1 as well as Category 2 workplace increasing q-o-q by 0.9% and also 4% respectively. Based on a basket of office buildings tracked by Colliers Research, rental fees of the Core CBD Premium & Grade A section expanded by 1.8% from the preceding quarter to $11.10 psf per month.
Looking ahead, while the return-to-office momentum will continue thrusting the office renting market, there are indications that worldwide financial headwinds are beginning to influence some occupiers’ real estate decisions, which can solidify office need in 2H2022, claims Tay Huey Ying, head of research and consultancy, Singapore at JLL.
The stronger performance was underpinned by Singapore further relieving workplace constraints, with 100% of staff members permitted to return to the workplace after April 26.