Singapore saw office rents bottom out in the third quarter of 2021, revealed Knight Frank in its quarterly office market report.
For the first time since Q4 2019, prime grade office rents within the Raffles Place / Marina Bay precinct increased by 0.2% quarter-on-quarter (q-o-q) to $9.98 per sq ft per month (psf pm).
The hike comes as occupancy rates within the precinct remained relatively stable, dropping marginally by 0.7 percentage points q-o-q to 93.6%, reversing the 0.1 percentage point growth registered in Q2 2021.
“In tandem with the firm signs of improvement in the office rental market, the volume of pre-termination space available fell 78.9% q-o-q in Q3 2021, declining empathically from the 360,000 sq ft estimate in Q2 2021 to some 76,000 sq ft in Q3 2021,” said Knight Frank.
“The decrease in shadow space was expected as the flight-to-quality continued with corporates taking advantage of the rare opportunity to snap up premium spaces in prime buildings that were normally fully occupied, before rents start to increase significantly.”
With corporates adapting to a post-pandemic work environment, co-working operators expanded their local offering as they expect demand for flexible work-spaces to increase.
The Executive Centre, for instance, opened its 38,736 sq ft location at One Raffles Quay North Tower in August, while The Great Room opened its location within the new Afro-Asia I-mark building, which spans 37,000 sq ft.
Knight Frank also observed strong demand for the upcoming supply of space from new office developments.
In fact, over 90% of CapitaSpring is already pre-committed or in advanced negotiations. IBM subsidiary Red Hat and Sumitomo Mitsui Banking Corporation have reportedly leased 60,000 sq ft and 68,600 sq ft of space at CapitaSpring, respectively.
“This reemphasised the appeal of Singapore as a neutral, accommodative and stable business node, drawing multi-national corporations to quality office space in the city,” said Knight Frank.
Barring a drastic worsening in Intensive Care (ICU) cases or the outbreak of a new variant, Knight Frank expects office rents to cautiously improve by 1% to 2% in Q4 2021, “before rental growth steadies and picks up pace, perhaps increasing by up to 5% in 2022”.
“With the Singapore government’s success in the vaccination rollout and limited new supply in the short- to medium-term, both corporates and landlords look to be increasingly optimistic about the office sector and are presently unphased by the rising case numbers,” it said.
Eugenia Liew, Senior Digital Content Specialist at PropertyGuru, edited this story. To contact her about this or other stories, email firstname.lastname@example.org.