Singapore office market recovery well underway: Colliers
Colliers advises tenants take early action on future workplace decisions, as the marketplace changes in favour of property managers. Landlords of office assets with outdated requirements need to take into consideration repurposing or redeveloping their assets, to future-proof them.
A workplace study by Colliers for 1Q2022 suggests that the improvement momentum in the Singapore office market is well underway. Premium and also Grade-A workplace rents in the CBD increased for a third successive quarter in 1Q2022, enhancing 1.5% q-o-q to get to $10.26 psf, sustained by healthy and balanced renting demand. This marks the fastest rate of development given that rents rebounded in 3Q2021.
In regards to the CBD micro-markets tracked by Colliers, office buildings in the Raffles Place/New Downtown location, in addition to the Shenton Way/Tanjong Pagar area, saw the highest growth in rentals, enhancing 2.3% q-o-q to get to $11.96 psf.
Leasing deals during 1Q2022 consisted of fashion seller Shein using up 21,000 sq ft at Marina Bay Financial Centre Tower 3. German chemical company BASF will be moving from its existing premises at Suntec Tower 1 to the upcoming Guoco Midtown.
Moving on, Colliers expects office properties in prime areas to proceed attracting a large range of resources, underpinned by a healthy leasing market overview, restricted brand-new supply, and also the resuming of Singapore’s borders.
The sector is expected to continue expanding in the coming months, supported by a broad-based financial recovery and return-to-office momentum. Colliers anticipates rentals for CBD premium and also Grade-An offices to grow by 4% to 5% in 2022.
The healthy leasing demand for the CBD premium as well as Grade-An office section is backed by corporates’ choice for more recent office complex with top notch specs, to prepare for employees going back to the office and the expected pick-up in organization task.
On the back of limited returns and also interest rate uncertainties, investors are encouraged to focus on active property maintenance or enhancement to attain return targets.
Meanwhile, on the investment front, typical funding values in the section boosted 5.6% q-o-q in 1Q2022, hitting $2,850 psf. Likewise, net returns compressed by 0.1% q-o-q to 3.4%, with cap prices coming in between 3% and 3.6% in the last quarter.
Premium and also Grade-An office buildings in the CBD additionally continued to see solid renting demand, with favorable net absorption of around 134,000 sq ft in 1Q2022. At the same time, the vacancy price tightened up to 3.3%.