Grade A office rents to maintain strong growth trajectory as vacancies fall
Grade A office rents to maintain strong growth trajectory as vacancies fall. According to a Savills Research report released on Wednesday, rental of Grade A offices in Singapore’s Central Business District (CBD) will remain strong in the near term as demand rises and vacancy levels fall further in Q3 (Oct 19). The research arm of Savills Singapore maintained their prognosis for Grade A CBD office rent growth of 3% for the entire year of 2022, but also predicted that rents would climb by 2% year on year in 2023.
According to the firm’s research, Grade A CBD office rentals jumped 1.4 percent year on year in the third quarter, the most in a quarter since the fourth quarter of 2019, when rents increased 2.9 percent year on year. Rents climbed 0.3% quarter on quarter to S$9.50 per square foot. This is slightly lower than the previous quarter, when there was a 0.4% gain quarter on quarter. It is also the third consecutive quarter of rent increases. Among the seven submarkets examined by the study team, Marina Bay witnessed the highest quarter-on-quarter rent growth, at 1.1% to S$12.31 psf. This is the highest rate of rise since the first quarter of 2019, when rentals increased by 3.7%. Beach Road/Middle Road and Raffles Place were next, with rents rising 0.6% to S$7.78 psf and 0.3% to S$9.68 psf, respectively, from the previous quarter.
Meanwhile, vacancy rates in CBD Grade A offices tracked by Savills increased by 1.2 percentage points to 5.6% in Q3, up from 0.4 percentage points in Q2. This is due to rising demand for CBD Grade A offices, according to Savills. This quarter’s net demand for these office spaces increased to 417,000 square feet, bringing the total net take-up of office space for the first three quarters of 2022 to 612,000 square feet.
According to Savills, this is owing to inflationary pressures, rising interest rates, and persisting geopolitical fears.
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