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Colliers Research noted that while Covid-19’s impact on rents was not apparent in Q1 2020, it expects the pandemic’s negative impact to manifest in Q2 2020.
Singapore saw average CBD Grade A rent remain unchanged quarter-on-quarter at $10.09 per sq ft per month (psf pm) in the first quarter of 2020, while Grade B offices eased its rental decline to 0.3% quarter-on-quarter at $8.44 psf pm, revealed a Colliers International report.
On an annual basis, rents for Grade A offices within the CBD increased by 4.7% and 4.8% for Grade B offices.
Colliers Research noted that while Covid-19’s impact on rents was not apparent in Q1 2020, it expects the pandemic’s negative impact to manifest in Q2 2020.
Nonetheless, it does not expect it to “jolt the office market as significantly as past crises”, such as the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 and the 2008 Global Financial Crisis.
“In the 2003 SARS episode, the effect was noticeable after a one-quarter lag. While the COVID-19 pandemic could last longer than SARS, we observe that the current office market has lower vacancy and supply than it did in 2003,” said Tricia Song, Head of Research for Singapore at Colliers International.
“Rental levels are also not at “bubble” levels seen in the run-up to the Global Financial Crisis (GFC) in 2008. However, the odds of a global recession have risen and pose downside risk to demand and rents. We expect a 4% rent decline in 2021 in view of slower demand and high forward supply.”
The Technology, Media and Telecommunications (TMT) and flexible workspace sectors emerged as the demand drivers for Q1 2020.
“Demand from TMT included An Xing Technologies occupying One Marina Boulevard, as well as Shutterstock and IRESS Market Technology in 18 Robinson,” said the report.
New space take-up at 18 Robinson during the period under review helped to push its occupancy to 95.3% from 67.3% previously. This resulted in the tightening of CBD Grade A vacancy to 3.1% from 3.4%.
In view of the limited supply, Colliers Research expects vacancies “to remain below the 10-year historical average of 6.2% in 2020-2021”.
Rick Thomas, Head of Occupier Services in Singapore at Colliers International, said the pandemic and safe distancing measures led many companies to progressively adopt remote working, with employees working from home or multiple locations.
“We believe the COVID-19 outbreak will profoundly change the way people work and could in fact fast track the adoption of new technologies, flex-and-core strategy, and demand for wellness certified buildings.”
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg