Singapore office market recovery well underway: Colliers
The section is expected to continue expanding in the coming months, sustained by a broad-based economic improvement and return-to-office momentum. Colliers expects rentals for CBD premium and Grade-An offices to grow by 4% to 5% in 2022.
Progressing, Colliers expects workplace assets in prime areas to proceed drawing in a vast array of capital, underpinned by a healthy and balanced leasing market expectation, restricted new supply, and also the reopening of Singapore’s borders.
Leasing deals throughout 1Q2022 included style seller Shein occupying 21,000 sq ft at Marina Bay Financial Centre Tower 3. German chemical business BASF will be relocating from its existing properties at Suntec Tower 1 to the upcoming Guoco Midtown.
The healthy and balanced leasing demand for the CBD premium and Grade-A workplace section is backed by corporates’ preference for more recent office buildings with top notch specs, in preparation for employees returning to the workplace and also the expected pick-up in organization activity.
Premium and also Grade-An office buildings in the CBD additionally continued to see strong renting demand, with favorable net absorption of around 134,000 sq ft in 1Q2022. Meanwhile, the vacancy rate tightened to 3.3%.
On the back of limited yields and also rate of interest uncertainties, financiers are suggested to focus on active asset monitoring or enhancement to accomplish return targets.
An office study by Colliers for 1Q2022 suggests that the recovery momentum in the Singapore workplace market is well in progress. Premium and also Grade-An office rents in the CBD increased for a third successive quarter in 1Q2022, raising 1.5% q-o-q to reach $10.26 psf, supported by healthy and balanced leasing demand. This notes the fastest speed of growth given that rentals recoiled in 3Q2021.
Colliers recommends occupants take early activity on future office choices, as the market shifts in favour of property owners. Landlords of office properties with obsolete requirements need to consider repurposing or redeveloping their assets, to future-proof them.
On the other hand, on the investment front, typical capital worths in the section increased 5.6% q-o-q in 1Q2022, hitting $2,850 psf. Correspondingly, net yields compressed by 0.1% q-o-q to 3.4%, with cap prices being available in between 3% and 3.6% in the last quarter.
In regards to the CBD micro-markets tracked by Colliers, office buildings in the Raffles Place/New Downtown location, as well as the Shenton Way/Tanjong Pagar location, saw the greatest development in rentals, increasing 2.3% q-o-q to get to $11.96 psf.