Prime office rents to rise by 7% in 2018: Colliers

Better GDP and economic conditions drove demand for office space.

Prime grade office rents are expected to rise by 5-7%, driven by firm GDP growth and recovering occupier markets, Colliers International revealed. Increasing demand from new tenant segments such as coworking operators and technology and media companies also play a part.

According to its Asian property outlook, Singapore, along with China, Japan, South Korea, and Hong Kong, should achieve higher or sharply higher economic growth in 2017 than in 2016, although modest slowdowns look probable for 2018.

Improved economic conditions have boosted demand for office and industrial space in Singapore. Office and warehouse rents should rise further or stabilise, boosting cash rental streams to landlords and thereby supporting investment property demand.

With robust economic growth and low real interest rates set to persist in Asia, investment property transaction volumes should remain high.

Singapore's transactions in completed properties rose 83% YoY, putting it in the third rank of top urban investment centres in Asia Pacific.

Assuming investment volumes increase again in 2018, property yields may well fall still further, even after several years of compression.

However, Colliers said, "Prime office properties in Singapore offer a 1-2 percentage point yield spread over bonds, and this remains one of our preferred markets in valuation terms."

Meanwhile, flexible workspaces, such as WeWork, which recently opened in December, has seen huge growth in many Asian cities and should continue.

"We expect to see deeper partnerships formed between landlords and operators over 2018, with many landlords understanding the need to add flexibility to their portfolios to retain large space users,"

The business and industrial park market is also expected to strengthen in Singapore and take off in the next years.

In Singapore, national strategic directives and support from the government are helping prepare the economy for the so-called Fourth Industrial Revolution featuring the adoption of new technologies such as big data and analytics, artificial intelligence and the Internet of Things.

Pilot schemes for flexible land use for industrial purposes are being tested now in major planned projects, and integrated "live-work-play-learn" spaces are being rolled out to access, attract and train talent.

"We envisage that supply of space in business parks and high-specification industrial parks will increase steadily from now on, and double by 2030," Colliers concluded.