Singapore saw office rents across its central business district rise by 2.3 percent in the first quarter to post the market’s fastest growth rate since 2021, with industry analysts projecting a continued upswing this year as the city-state gains in stature as a regional business hub.
Data from JLL Singapore showed average gross effective rents for grade A offices in the CBD grew to S$10.46 ($7.72) per square foot this quarter from S$10.23 in the preceding three months, sustaining the pandemic-hit leasing market’s recovery.
“Active demand for office space continues to come from the technology, consumer and non-bank financial sectors,” said Andrew Tangye, head of office leasing and advisory for the real estate consultancy firm. “Singapore’s tech hub status has attracted a number of major players who continue to grow whilst others look to establish a regional presence here.
Given the strong start to the year and the city’s success in bringing workers back to the office, leasing rates in Singapore’s downtown core this year are on track to grow at double 2021’s 4.3 percent increase, the agency predicts.
Rents Rising Fast in Marina Bay
The January through March performance marked the fourth consecutive quarter of rental growth in the CBD and the most dynamic increase since rates dipped 0.3 percent in the first three months of 2021. Since bottoming out one year ago at average rents of S$9.79 per square foot, the office leasing market in the city centre has now climbed 6.9 percent in price.
JLL’s Tangye said Singapore’s reputation as a tech hub continues to attract global players looking to set up regional offices, while the city has also seen continued growth across a broader industrial spectrum.
Among the four CBD submarkets tracked, Marina Bay – which is home to many of the city’s newest prime projects – posted the sharpest increase in leasing rates, with monthly average rents rising 3.2 percent to an average of S$12.14 per square foot this quarter from S$11.77 in the previous three months.
“This is driven by occupiers’ preference for newer and good quality developments as they make concerted efforts to ensure employees are returning to healthy working environments and sustainable workplaces,” said Tay Huey Ying, research and consultancy head at JLL Singapore.
Netherlands-headquartered accounting giant KPMG is among the occupiers that drove rental demand in the area after taking up around 100,000 square feet of office space at the 46-storey Asia Square Tower 2 this quarter.
Average office rents in Marina Bay are now around 22 percent more expensive than the other three segments of the CBD, with leasing rates in Marina Centre averaging the second-highest rates during the quarter at S$9.98 per square foot, followed by Raffles Place at S$9.93 per square food and the Tanjong Pagar-Shenton Way area providing the most affordable locations at S$9.50 per unit.
The Raffles Place saw 673,000 square feet of commercial space officially enter the market during February when CapitaLand opened its 51-storey CapitaSpring project on Market Street. Among the tenants occupying the “biophilic” project’s 29 floors of office space are JP Morgan, which had agreed to terms in 2018, as well as Sumitomo Mitsui Banking Corporation and JLL itself.
JLL’s report of a rebound in Singapore’s downtown core gybes with the findings of rival consulting firms, with Savills Singapore reporting average monthly office rents in grade A CBD office buildings picking up by 0.5 percent from January through March, after holding steady from the third quarter of 2021 at S$9.37 per square foot in the final three months of last year.
Alan Cheong, Savills Singapore’s head of research and consultancy, said the firm expects that rents in Singapore’s prime office locations will rise by three percent this year as they rebound from a 1.6 percent year-on-year drop in 2021.
Cheong said rents rose the fastest in offices categorised as grade AAA, with projects like Asia Square and the Marina Bay Financial Centre in Marina Bay, as well as OUE Bayfront in Raffles Place, leading the recovery momentum this quarter.
With Singapore having done away with most of its remaining travel restrictions this month and relaxed guidelines regarding social and business events, analysts are confident that the city-state’s business climate will continue to improve.
“Barring new variants, it should not be long before all employees are allowed to return to the workplace.” JLL’s Tay said. “The prospects of the CBD returning to its former vibrant self should spur more occupiers to secure office spaces in preparation for their employees’ return and position their businesses for growth as Singapore’s economy and international borders open further.”