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With a lower need for a Central Business District (CBD) office space as most employees are still working from home, Cushman & Wakefield expects office rents in city fringe areas to increase as more firms turn to these areas to slash their real estate costs.
Cushman & Wakefield expects rents for business parks within the city fringe areas to increase as more firms turn to business parks with Grade A specifications to slash their real estate costs, reported The Business Times (BT).
In Q3 2020, rents for city fringe business parks increased 0.2% quarter-on-quarter and 2.4% year-on-year to $5.91 per sq ft per month (psf pm), according to Cushman & Wakefield data.
Another factor contributing to the shift to business parks is the number of companies with a large proportion of employees working from home, which led to a lower need for Central Business District (CBD) office space, said Christine Li, Cushman & Wakefield Head of Research for Singapore and South-east Asia.
“The movement towards business parks with Grade A specifications along with the continued moderation of Grade A CBD rents will further narrow the rental gap between CBD office and city fringe business park space over the next few quarters,” she said as quoted by BT.
Li expects the trend to reverse only after Grade A CBD rents fall by a projected 20% next year and become more affordable again for occupiers.
Rents for business parks in outlying areas, however, are expected to drop due to their older stocks. In Q3 2020, business park rents in such areas stood at $3.64 psf pm.
Another bright spot is the prime logistics segment, where rents are forecasted to increase due to a strong preference for ramp-up facilities. Prime logistics rents climbed 1.5% quarter-on-quarter in Q3 2020.
A slight uptick in rents for science park facilities is also expected due to growing demand for products and research and development within the healthcare sector. In Q3 2020, rents for such facilities stood at $4.27 psf pm.
High-tech rents – which stood at $3.12 psf pm in Q3 – is projected to remain stable, on the back of the electronic sector’s growth.
Despite all these, investment activity towards logistics assets has been low, with the number of deals inked down 39% quarter-on-quarter and 89% year-on-year to $446.5 million in Q3.
“Long-term players in the logistics sector are reluctant to sell their assets, unless the investor is a fund with a fixed fund life,” said Brenda Ong, Cushman & Wakefield Executive Director and Head of Logistics and Industrial.
This comes as quality assets are few and far between and investors are bound by sale moratoriums as regulated by authorities, she added.
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