Prime office rents up 0.9% in Q2

Co-working space operators drove net absorption.

Rents for Singapore's prime office submarkets - Raffles Place and Marina Bay - rose 0.9% QoQ in Q2, according to a report from Knight Frank. On a YoY basis, rents rose 10.3% in Q2 to US$82.8 sqm/month, which translates to a gross effective rent of US$95.2 sqm/month. 

The rapid expansion of co-working spaces drove the robust quarterly net absorption levels in the prime locations. A separate report from Colliers expects co-working spaces to snap up 550,000 sqft of the local office market by end-2019.

In 2013-2018, the number of flexible office set-ups more than doubled and its market size expanded by three times in the five-year period, data from CBRE show. As of June 2019, approximately two in five office buildings in Singapore currently have some sort of flexible office component.

Also read: Landlords cash in on Singapore's co-working boom

Against this positive outlook, Knight Frank expects prime office rents in Singapore to increase over the next 12 months, in a development that bucks the flat or declining rental growth forecast for the rest of the region. 

Across Asia-Pacific, office rents rose 0.9% in Q2 to reverse the 0.4% decline in the previous quarter amidst stable rental growth in Tokyo's Central 5 Wards (6.9%). On an annual basis, office rents rose 3.4%, but marks a slowdown from 6.2% in the previous quarter.

In Q2, prime office rents rose in Brisbane, Melbourne, Perth, Sydney, Taipei, Bengaluru and Mumbai whilst remaining the same at Guangzhou, NCR, Phnom Penh, Jakarta and Bangkok. On the other hand, leasing costs fell in Beijing, Shanghai, Hong Kong, Kuala Lumpur and Manila. 

“With no end in sight over the trade tensions between the world’s two dominant economies, the looming prospect of a hard Brexit and the ongoing concerns in Hong Kong, we expect the rest of 2019 to remain challenging for Asia-Pacific office markets," Nicholas Holt, Head of Research for Asia-Pacific, said in a statement.