CBD Grade A rents lead charge in office market

The 0.5% QoQ increase in Q4 2021 reflected the market's resilience.

Diversified professional services and investment management firm Colliers released its Office Market Outlook 2022 report, interpreting the latest quarterly trends and providing the office market outlook for the year ahead.

CBD Grade A office rents rose by 0.5% quarter-on-quarter (QoQ) in Q4 2021 to $9.64 per sqft, after growing 0.7% in Q3. Thus 2021 concluded with positive sentiments for the prime office market.

The demand for CBD Grade A office spaces was supported by occupiers pursuing 'flight-to-quality' strategies, the expansion of technology and selected financial services firms, and displaced tenants of Grade B office buildings undergoing redevelopment. 

"Demand for CBD Grade A office has been encouraging and is expected to remain resilient in the coming quarters. However, demand for Grade B CBD offices remains comparatively muted, and the office rental gap between both segments will inevitably widen. There is now more urgency for the older office buildings to upgrade and refresh their image," said Colliers head of tenant representation June Chua.

As leasing demand continues to pick up pace alongside improving economic conditions, the CBD Grade A vacancy rate is expected to head southwards and go below 4% by the end of 2022.

With limited new supply coming on stream and the removal of ageing office stock for redevelopment, CBD Grade A office rents will see upward momentum and are forecasted to grow by around 4.4% in 2022.