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Office supply has been falling, particularly in the core central business district (CBD).
Singapore saw Grade A office rents increase 3.2 percent quarter-on-quarter to $11.15 per sq ft per m in the first quarter of 2019, revealed a UOB Kay Hian (UOBKH) report.
This comes as office supply has been tapering, particularly in the core central business district (CBD).
Supply eased to 1.3 million sq ft this year, of which only 228,958 sq ft is in the core CBD.
“The office market bottomed in 1H 2017 and has progressed to the second year of recovery. Continued upside for office rents is supported by tapering of supply,” said UOBKH analysts Jonathan Koh and Peihao Loke.
Demand was driven by modern services, technology firms, including start-ups and fintechs as well as co-working operators, they said.
The analysts also noted that Grade A office space occupancy within the core CBD witnessed a v-shaped recovery from a trough of 91.6 percent in the third quarter of 2017, following the completion of Marina One (East Tower and West Tower) with 1.9 million sq ft of office space.
“Occupancy has recovered to a healthy 95.2 percent in 1Q 2019,” they said.
Looking ahead, UOBKH expects future supply to come in at 5.33 million sq ft for 2019 to 2022 or an average of 1.36 million sq ft per annum – which is 29 percent below the 10-year average of 1.91 million sq ft.
“Leasing interest for upcoming new developments is fairly healthy,” said the analysts.
“Net absorption of office space is at 137,936 sq ft in 1Q 2019, comparable to 149,444 sq ft in 1Q 2018 (1Q is usually seasonally softer).”
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru
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