Grade A office rents to maintain strong growth trajectory as vacancies fall

by Albert02

Grade A office rents to maintain strong growth trajectory as vacancies fall

Grade A office rents to maintain strong growth trajectory as vacancies fall. Rental of Grade A offices in Singapore’s Central Business District (CBD) will remain robust in the near term, as demand rises and vacancy levels fall further in Q3, according to a Savills Research research released on Wednesday (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 data, Grade A CBD office rentals increased 1.4 percent year on year in Q3 – the most in a quarter since Q4 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. Among the seven submarkets examined by the study team, Marina Bay witnessed the highest quarter-on-quarter rent growth, at 1.1% to S$12.31 psf. This is the highest rate of rise since the first quarter of 2019, when rentals increased by 3.7%. Beach Road/Middle Road and Raffles Place were next, with rents rising 0.6% to S$7.78 psf and 0.3% to S$9.68 psf, respectively, from the previous quarter.

Meanwhile, vacancy rates in CBD Grade A offices tracked by Savills fell for the second consecutive quarter in Q3 and at a faster rate, increasing by 1.2 percentage points to 5.6%, compared to 0.4 percentage points in Q2. According to Savills, this is attributable to increased demand for CBD Grade A offices. Net demand for these office spaces climbed to 417,000 sq ft this quarter, bringing the total net take-up of office space for the first three quarters of 2022 to 612,000 sq ft.

This is expected, according to Savills, due to inflationary pressures, increasing interest rates, and persistent geopolitical concerns.

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