APPD Market Report Article


November 29, 2022

Tay Huey Ying, Head of Research, Singapore


SGD 11.1


Strong net absorption pushes vacancy to its tightest in 2.5 years

  • Driven by the tailwind of the economy re-opening, leasing activities remained healthy in 3Q22 despite growing concerns over the looming economic slowdown. New take-ups in the quarter included Capgemini’s recent move to a bigger office in Singapore after they relocated more key functions from Hong Kong to the city-state.
  • Flexible workspace operators are also resuming their expansion plans after a couple of lean years due to the pandemic. For example, WeWork recently opened its flexible workspace facility at 21 Collyer Quay, reportedly already 90% committed. The Executive Centre also expanded their facility at Ocean Financial Centre by taking up an additional floor in the building.

Healthy pre-commitment rates for new office developments

  • The redeveloped Hub Synergy Point was completed in 3Q22, while Guoco Midtown is on track to be completed in 4Q22. The pre-commitment rate for Guoco Midtown rose from close to 30% as of 2Q22, to 50% as of 3Q22.
  • IOI Central Boulevard Towers remains the only Grade A office project expected to complete in 2023. Close to 30% of the space has already been pre-committed as of 3Q22.

Rents rise above their pre-pandemic peak to a near-14-year high

  • CBD investment-grade office rent growth continued to trend upwards for the sixth consecutive quarter amid tightening vacancy rates, and is now at its highest level since 4Q08.
  • Capital value growth of CBD investment-grade offices decelerated to a near halt in 3Q22, as investors turned selective and cautious in the face of the slowing economic outlook and soaring interest rates.

Outlook: Global economic headwinds could cool the market in 2023

  • Full-year 2022 office rents remain on track to double that of 2021. However, rent growth is expected to slow in 2023, given the downcast economic outlook which could weigh on demand for office space over the next 12 months. This also takes into consideration the expected competition for tenants, as landlords try to backfill space vacated by occupiers upgrading to new projects.
  • The rising cost of debt and slowing near-term office rent growth outlook will continue to impact underwriting and returns, leading to more selective acquisitions. Nonetheless, investors still view Singapore as a safe haven, and remain keen on premium commercial acquisition opportunities on the back of the long-term value proposition of Singapore’s office assets.

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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