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Singapore’s central business district (CBD) saw average Grade A office rent increase 3.7 percent quarter-on-quarter to $10.63 psf per month during the first quarter of 2019, reported Singapore Business Review citing JLL statistics.
The figure is 0.7 percent above the recent peak registered in Q1 2015 at $10.56 psf per month and the highest since Q4 2008 when average rents stood at $12.55 psf per month.
“Q1 2019 rent growth was broad-based across all submarkets, with Marina Bay in the lead. As of the end of Q1 2019, the average monthly gross effective rent of Grade A office space in the Marina Bay submarket stood at $12.54 psf after rising 4.8 percent quarter-on-quarter from $11.96 psf in Q4 2018,” said JLL.
The CBD also saw average vacancy rate of Grade A office space drop from 7.2 percent during the fourth quarter of 2018 to just six percent in Q1 2019. This caused rent growth to accelerate from 3.3 percent quarter-on-quarter in Q4 2018 to 3.7 percent quarter-on-quarter in Q1 2019.
By the time more occupiers move in to recent completions such as 18 Robinson and Frasers Tower, JLL predicts the average vacancy rate of Grade A CBD office space to plunge below the frictional level of five percent by end-Q4 2018.
“No relief is seen for supply anytime soon. This is because the next office completion in the CBD will likely be 79 Robinson Road and Afro Asia i-Mark which are expected to provide some 0.7 million sq ft of office net lettable area in total only from 2020.”
JLL expects the refurbished Chevron House to come on-stream in 2020, while CapitaSpring and Hub Synergy Point could return to the market by 2021. These developments will be followed by Guoco Midtown and the Central Boulevard project in 2022. The Shaw Tower, on the other hand, is slated to be completed in 2023. Taken together, these developments could yield an average annual new supply of about 1.0 million sq ft between 2020 and 2023.
“With the next new office development in the CBD expected to come on stream only from H1 2020 onwards, upward pressure on rents is unlikely to abate anytime soon. This is especially in view that schemes completing outside the CBD this year (e.g. Funan and 9 Penang Road) are seeing keen occupier interest and could enjoy healthy pre-commitments, including forward leasing deals,” noted Tay Huey Ying, head of research and consultancy at JLL Singapore.
“They are thus unlikely to significantly ease upward pressure on CBD Grade A rents as earlier envisaged.”
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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