Singapore third-quarter office rents surpass pre-pandemic peak to nearly 14-year high: JLL

According to JLL, it took only 18 months for CBD Grade A offices in Singapore to recoup land lost due to the COVID-19 pandemic.

Research from the real estate consultancy showed that gross effective rent for CBD Grade A office space rose 2.9% quarter-on-quarter to average SGD11.06 per square foot per month in 3Q22, from 10 .74 SGD per square foot per month in 2Q22. This exceeded the pre-pandemic peak of 10.81 SGD psf per month recorded in 4Q19 and is the highest since the 12.55 SGD posted in 4Q08.

Source: JLL Research

Ms. Tay Huey Ying, Head of Research and Consulting for JLL Singapore, explains, “The office rental market held up better than expected to the pressure of external economic headwinds. Net uptake of Grade A CBD office space remained elevated, just slightly below the 17-quarter high recorded three months ago, and well above new supply from completion of Hub Synergy Point. This pushed the 3Q22 average gross effective rent for CBD Grade A offices up 2.9% from the quarter above expectations.

Mr. Andrew Tangye, Head of Office Leasing and Consulting for JLL Singapore adds: “There is some growing caution among the occupiers in light of the headwinds in the global economy. However, the office leasing market continues to benefit from the tailwind of the reopening of the economy following the shift to COVID-19 endemicity. The market activity of the last nine months proves beyond any doubt that companies consider the physical office as an essential component of the work ecosystem, whether hybrid or not. In fact, the dispersed workforce resulting from hybrid working has increased the importance of physical offices as an anchor for building company values, instilling a sense of belonging in employees, and driving collaboration. between the teams.

The office investment sales market remained active, with 17 assets worth SGD5 million and above changing hands in 3Q22, compared to eight in the previous three months. However, due to smaller deal sizes, the cumulative value of investment sales fell for the third consecutive quarter to SGD1.27 billion in 3Q22, 19.6% lower than the SGD1.57 billion collected. in 2Q22.

Ms. Ting Lim, Head of Capital Markets for JLL Singapore comments, “Investors remain interested in office assets in Singapore, but soaring interest rates have dampened their appetite, leading to more selective acquisitions. The successful completion of the sale of Income at Raffles for nearly $1 S$1 billion in the quarter reflects continued strong demand for high-end business opportunities driven by positive longer-term rental growth and high barriers to entry.

Regarding the outlook for the office property market, Mrs. Tay is of the opinion, “Grade A CBD rents could end 2022 with full-year growth of around 10%, accelerating from the 4.3% recorded in 2021. The gloomy skies could weigh on the demand for office space in 2023 and slow rental growth to less than 5%. This takes into account the intense competition expected for tenants to fill spaces vacated by occupiers moving to new projects such as Guoco Midtown scheduled for completion by the end of 2022 and IOI Central Boulevard Towers in 2023. We remain optimistic that CBD Grade A rental growth momentum is poised for another strong rebound once the headwind from the global economy subsides given the limited new supply after 2023. »

Carol N. Valencia