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Despite the increased rent, demand for office space remains robust.
Demand for quality office space continued to be strong in Singapore, with the central business district (CBD) witnessing decade-high capital values, according to JLL.
Just last month, Oxley sold its 32-storey office and retail building in the CBD, Chevron House, for $1.025 billion to U.S. real estate fund AEW. The sale represents a 35 percent increase on capital value compared to when it was acquired in 2017.
“The strong growth in Singapore office capital values over the last 12 months is supported by the market’s very favourable demand-supply dynamics and a benign interest rate outlook,” said Regina Lim, JLL’s head of capital markets research for Southeast Asia.
Office rents in Singapore have been on the uptrend over the last two years, with the 12 percent growth forecast for this year expected to surpass the rest of the region.
Despite the increased rent, demand for office space remains robust, driven mainly by technology, professional services and flexible work spaces providers, noted Lim.
Forbes Magazine even noted that 59 percent of big multinational technology firms have their Asian headquarters in the city-state, while Hong Kong houses 18 percent.
Occupied office stock within the CBD significantly grew by six percent in 2018, from just 2.3 percent yearly from 2013 to 2017.
“Alongside increasing demand, the city is set to face supply shortages in the CBD until at least 2021 which may lead to rents growing by four to six percent annually in the next five years,” said JLL.
Meanwhile, the Urban Redevelopment Authority’s announcement of a “CBD incentive scheme” could change the supply and type of office space in the CBD over the next five years.
Under the scheme, buildings that meet the size requirements and are at least 20 years old are qualified for 25 to 30 percent increased plot ratio, provided they are converted by their owners into mixed-use developments.
“By encouraging the redevelopment of older buildings into integrated mixed used developments, we believe Singapore will widen its lead as a global city for companies, talent and capital,” said Lim.
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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