APPD Market Report Article

Singapore

August 26, 2022

Tay Huey Ying, Head of Research, Singapore

8.5%

SGD 10.7

Rents
Rising

Net absorption rebounds sharply in 2Q22, driving down vacancy

  • Leasing activities picked up pace in 2Q22, underpinned by Singapore’s growing appeal as a business hub alongside the total lifting of COVID-19 restrictions on the return of workers to the office. Expansions and new set-ups overshadowed workplace downsizing with net absorption recording its strongest performance in 17 quarters, edging down vacancy rate.
  • Blackstone is reported to be doubling its space from 17,000 sq ft to 36,000 sq ft and will be moving from Marina Bay Financial Centre Tower 2 to Tower 1. Chinese law firm Han Kun Law Offices is also reportedly looking to set up a new office in Singapore to support its existing clients’ growth in the region.

Another aged office building to undergo redevelopment

  • No new projects were completed in the CBD in 1H22 but another aged office development in the CBD, Clifford Centre, is slated for redevelopment that could potentially start in 2023.
  • Grade A office projects, Guoco Midtown and IOI Central Boulevard Towers, remain on track to come on stream in 2022 and 2023, respectively.

Rents rise to just below their pre-pandemic peak

  • CBD investment-grade office rent growth continued to accelerate for the fourth consecutive quarter to stand just below its pre-pandemic peak level in 4Q19. Large-space users are finding it especially difficult to source suitable alternative premises, thus limiting their bargaining power during lease renewals.
  • Capital values of CBD investment-grade offices stayed on an uptrend, but the pace of growth slowed in 2Q22 amid rising interest rate concerns.

Outlook: Rents and capital value growth to face headwinds

  • Geopolitical and economic uncertainties could temper business confidence and dampen occupier demand for office space in 2H22. However, the availability of space in the CBD will remain tight on the back of the continuing office redevelopment momentum. Rent growth in 2H22 is expected to slow but is still on track to double that in 2021, as growth in 1H22 has already exceeded that of full-year 2021.
  • Demand for premium office investment opportunities remains healthy in Singapore on the back of longer-term positive rental upside and high barriers to entry but soaring interest rates are tempering investors’ risk appetite and bid prices. This could potentially lead to minor pricing adjustments in the near term.

Note: Singapore Office refers to Singapore's CBD Grade A office market in Marina Bay, Raffles Place, Shenton Way and Marina Centre.

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