Singapore office market recovery well underway: Colliers
A workplace study by Colliers for 1Q2022 shows that the improvement momentum in the Singapore office market is well in progress. Premium and also Grade-An office rentals in the CBD increased for a 3rd successive quarter in 1Q2022, raising 1.5% q-o-q to reach $10.26 psf, supported by healthy renting need. This marks the fastest speed of development given that rents rebounded in 3Q2021.
Moving on, Colliers anticipates office assets in prime areas to continue bring in a large range of resources, underpinned by a healthy leasing market overview, limited brand-new supply, and also the reopening of Singapore’s borders.
The healthy leasing need for the CBD premium as well as Grade-An office section is backed by corporates’ choice for newer office complex with high-grade specifications, to prepare for workers going back to the workplace and the anticipated pick-up in service task.
Leasing purchases during 1Q2022 included fashion store Shein taking up 21,000 sq ft at Marina Bay Financial Centre Tower 3. German chemical firm BASF will be transferring from its existing premises at Suntec Tower 1 to the upcoming Guoco Midtown.
Meanwhile, on the financial investment front, typical funding values in the sector increased 5.6% q-o-q in 1Q2022, striking $2,850 psf. Correspondingly, net yields compressed by 0.1% q-o-q to 3.4%, with cap prices coming in between 3% and 3.6% in the last quarter.
In terms of the CBD micro-markets tracked by Colliers, office buildings in the Raffles Place/New Downtown area, as well as the Shenton Way/Tanjong Pagar location, saw the highest development in rentals, increasing 2.3% q-o-q to reach $11.96 psf.
Premium and also Grade-An office buildings in the CBD additionally remained to see strong leasing need, with favorable net absorption of around 134,000 sq ft in 1Q2022. Meanwhile, the openings price tightened up to 3.3%.
Colliers advises occupants take very early activity on future office decisions, as the marketplace changes in favour of landlords. Landlords of office assets with out-of-date requirements should think about repurposing or redeveloping their assets, to future-proof them.
On the back of tight yields and also rates of interest unpredictabilities, capitalists are recommended to focus on active property monitoring or improvement to achieve return targets.
The sector is expected to proceed expanding in the coming months, supported by a broad-based financial recovery and also return-to-office momentum. Colliers anticipates rentals for CBD premium and Grade-A workplaces to expand by 4% to 5% in 2022.