Singapore CBD Office Rents Neared Pre-COVID Peak in Q2 Says JLL

Grade A office rents in Singapore’s central business district have recovered to within striking distance of their pre-pandemic peak and could exceed that level soon, according to research by JLL.

Gross effective rents for Grade A office space in the CBD rose for a fifth straight quarter in the April-June period to average S$10.74 (now $7.73) per square foot per month, or just 0.6 percent below the pre-COVID peak of S$10.81 recorded in the fourth quarter of 2019, the property consultancy said Wednesday in a release.

Average rents climbed 2.7 percent in the second quarter from the previous three months, accelerating from the 2.3 percent gain posted in the first quarter. First-half rents jumped 5 percent, surpassing the 4.3 percent growth recorded for all of 2021.

“The Singapore office property market enjoyed a strong quarter in 2Q22,” said Tay Huey Ying, head of research and consultancy for JLL Singapore. “Business confidence rose on the back of the authority’s commitment to transit to living with endemic COVID reflected in the swift and extensive relaxation of safe management measures, including allowing all employees to return to workplaces effective from 26 April 2022.”

Workplaces in Growth Mode

Expansions and new set-ups outpaced workplace downsizing in the second quarter, boosting net absorption of CBD Grade A office space to 600,000 square feet (55,742 square metres) — the highest level in 17 quarters. The vacancy rate fell sharply to 6.8 percent from 8.6 percent in the first quarter, Tay said.

The Marina Bay submarket, regarded as having the largest stock of new and good-quality office developments, saw the steepest gain in average rents in the second quarter, up 3.4 percent from the previous three months.

Marina Bay is home to the under-construction IOI Central Boulevard Towers, where forward leases to lock in space and rents — including a reported 350,000 square feet to be taken up by Amazon — are driving up rates, said Andrew Tangye, head of office leasing and advisory for JLL Singapore.

In the Bugis area, meanwhile, pre-commitment rates are on the rise at GuocoLand’s Guoco Midtown mixed-use project ahead of the development’s completion later this year, Tangye said.

“We have experienced very positive leasing activity since the end of 2020 and much of this is expected to continue into the second half of the year,” he said, “but there are some early signs that the global economic headwinds are starting to have an impact on how some occupiers make real estate decisions.”

Booming Investment Market

JLL’s research found that investors committed S$4.7 billion to Singapore office assets worth at least S$5 million in the first half of the year, a blistering pace after pouring S$5.2 billion into the asset class during all of 2021.

Office investment deals in the second quarter were driven by assets outside the CBD, led by Lendlease and Singtel’s S$1.63 billion acquisition of the Comcentre in the Orchard area for a S$3 billion redevelopment project.

The availability of space in the CBD is expected to remain tight amid a continuing office redevelopment push, with Tay offering SingLand’s refurbishment of its Clifford Centre headquarters in Raffles Place as the latest example.

Grade A CBD office rents should breach their pre-COVID peak in the third quarter, she said, while full-year rent growth could double 2021’s reading.