Grade A office rents to maintain strong growth trajectory as vacancies fall
Grade A office rents to maintain strong growth trajectory as vacancies fall. According to a Savills Research research issued on Wednesday, renting of Grade A offices in Singapore’s Central Business District (CBD) will remain strong in the near term as demand rises and vacancy levels fall further in Q3 of this year (Oct 19). Savills Singapore’s research arm maintained their projection for Grade A CBD office rent growth of 3% for the entire year of 2022, but also forecasted that rents would rise by 2% year on year in 2023.
According to the firm’s analysis, Grade A CBD office rents grew 1.4 percent year on year in the third quarter, the most since the fourth quarter of 2019, when rents increased 2.9 percent year on year. Rents climbed 0.3% quarter on quarter to S$9.50 per square foot. This is slightly lower than the previous quarter, when there was a 0.4% gain quarter on quarter. It is also the third consecutive quarter of rent increases. Marina Bay had the largest quarter-on-quarter rent growth, at 1.1% to S$12.31 psf, of the seven submarkets studied by the study team. This is the fastest pace of increase since the first quarter of 2019, when rentals grew by 3.7%. Beach Road/Middle Road and Raffles Place came next, with rents climbing 0.6% to S$7.78 psf and 0.3% to S$9.68 psf, respectively, from the previous quarter.
Meanwhile, vacancy rates in Savills’ CBD Grade A offices rose by 1.2 percentage points to 5.6% in Q3, up from 0.4 percentage points in Q2. According to Savills, this is attributable to increased demand for CBD Grade A offices. The net demand for these office spaces climbed to 417,000 square feet this quarter, bringing the total net take-up for the first three quarters of 2022 to 612,000 square feet.
Savills attributes this to inflationary pressures, rising interest rates, and persistent geopolitical concerns.
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