Central Singapore Office Rents Rose 1.2% in Q2 in First COVID-Era Increase

Spring has brought fresh growth to Singapore’s central business district as office rents registered their first uptick since the dawn of the pandemic, JLL said this week in its second-quarter research report.

Average monthly gross effective rents for Grade A office space in the city’s urban core rose 1.2 percent to S$9.90 ($7.38) per square foot from S$9.79 in the first quarter, according to estimates from the property services firm.

Tay Huey Ying, head of research and consultancy at JLL Singapore, said the successful containment of COVID-19 that led to the city-state’s economy reopening last December, coupled with a vaccine roll-out, has improved market sentiment and restored occupier confidence.

“This has slowed down business downsizing and emboldened some corporates to consider expansions or set up offices in Singapore,” she said.

The upturn in the Southeast Asian financial hub parallels a turnaround in Hong Kong, which saw office leasing expand last month for the first time in two years.

Leasing Hits Stride

Leasing activity in Singapore has picked up since the start of the year, with interest coming mainly from growth sectors like tech, wealth management, family businesses and healthcare.

Also playing to the city’s strengths is a growing emphasis on sustainable workplaces and employee wellness, with the trend driving demand for newer and greener office assets, said Andrew Tangye, head of office leasing and advisory at JLL Singapore.

As a result, 70 percent or more of the 800,000 square feet (74,322 square metres) of office space due for completion in 2021 had already been taken up as of the second quarter, including leases at CapitaLand’s trophy CapitaSpring tower and the refurbished Afro-Asia Building on Robinson Road.

CapitaSpring, a $1.3 billion mixed-use project in the Raffles Place commercial hub, achieved its full height of 280 metres (919 feet) in January. The 51-storey development, which counts financial giant JP Morgan Chase as an anchor tenant, is on track to receive a temporary occupation permit in the second half of 2021.

The 1950s-vintage Afro-Asia Building, redeveloped into the Afro-Asia i-Mark, is an 18-storey tower with 12 office floors and retail and dining on the ground floor. The property sits at the junction of Robinson Road and McCallum Street in the financial district, about a five-minute walk from Tanjong Pagar MRT station.

Upbeat on Second Half

JLL remains optimistic about the prospects of Singapore’s office leasing market and expects Grade A CBD office rents, which edged up 0.9 percent in 2021’s first half, to continue firming up in the second half, potentially culminating in full-year growth of 2-3 percent.

The 9.5 percent decline in CBD office rents during the COVID emergency is a mere fraction of the 56.5 percent plunge recorded from the second quarter of 2008 to the fourth quarter of 2009, when the economy reeled from the global financial crisis.

“This speaks volumes about how demand for Singapore as an office location has become much more robust, diverse and tenacious compared to a decade ago, and is one of the key reasons for investors’ unwavering interest in Singapore’s office assets,” said Ting Lim, head of capital markets at JLL Singapore.

Amid Singapore’s worst post-independence recession, investors injected 270 percent more capital into the sector in 2020 than during the financial crisis, according to JLL. Investors have acquired some S$1.71 billion worth of Singapore office assets since the beginning of 2021.

The city’s rival to the north had suffered a more prolonged downturn with absorption of Grade A office space in Hong Kong having failed to expand during any month from July 2019 through May of this year, according to another report by JLL.

The consultancy attributed Hong Kong’s turnaround to renewed willingness to sign new leases as the COVID-19 pandemic showed signs of easing.

“Occupiers have started to resume real estate decision-making in recent months as business confidence builds in Hong Kong,” said Alex Barnes, head of agency leasing at JLL in Hong Kong. “We believe that the worst period for the office leasing market has passed and rental fall will moderate in the second half of the year for most core markets.”