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The Singapore office market is in its early stages of recovery, with rents in the core Central Business District (CBD) increasing by a total of 17 percent over five consecutive quarters as at Q3 2018, reported Singapore Business Review citing a UBS Asset Management report.
This comes as demand for office space proved to be healthy in 2017 and 2018, on the back of strong economic performance arising out of the co-working boom.
“But in a heartening sign, there is also evidence of demand broadening out to other sectors,” said the report’s authors Shaowei Toh and Adeline Chan.
“This is evident in leasing activity which is reportedly coming from the banks, oil and gas firms, insurance companies and shipping firms. Expectations of buoyancy in demand for the coming year should be tempered given its close correlation with gross domestic product (GDP) growth, notwithstanding the rental upcycle that is expected to continue due to a lack of completions.”
The report noted that pipeline supply from 2019 to 2021 is expected to stand at around 0.7 million sq ft per year, which is less than 50 percent of both the 10-year average new supply of 1.8 million sq ft per year as well as the 10-year average net absorption of about 1.4 million sq ft per year.
The next spike in completions will arrive in 2022 when nearly two million sq ft of space is forecasted to come into the market.
Until such time, the lack of options for occupiers could lead to continued rental gains in spite of a weaker economy.
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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