CBD Grade A office rents surged 14.9% in 2018

Rents in Shenton Way/Tanjong Pagar jumped 18.4% to $9.53 psf pm in Q4.

Prime office rents in Singapore’s Central Business District (CBD) edged up 14.9% in 2018 after a QoQ growth of 2.4% in average CBD Grade A office rents to $9.43 psf pm, Colliers International said. The research firm revealed that the growth rate was highest since the rental hikes recorded back in 2010 when rents climbed 22% in a rebound following the Global Financial Crisis.

The largest rental hikes were observed in Shenton Way/Tanjong Pagar were rents grew 18.4% YoY to $9.53 psf pm and Beach Road where rents increased 18.6% YoY to $8.53 psf pm in Q4. According to Colliers International, the rental increases were boosted by premium new office spaces in the said submarkets including Guoco Tower and Duo which were completed in 2016.

The last quarter of 2018 also saw CBD Grade A vacancy tightening by 0.2ppt QoQ to 5.4% with no new completions and net absorption outstripping supply. The firm estimated that net absorption hit 1.28 million sqft in CBD Grade A office.

Also read: Office supply pipeline could hit 704,000 sqft in 2019

“In view of tight vacancy and a muted supply pipeline, we expect the steady upward rental trend to persist over the next two years, with average rents rising an estimated 8% YOY in 2019, and a further 5% YOY over 2020,” Tricia Song, head of research for Singapore, Colliers International, said.

Also read: CBD Grade A space market could remain constrained until 2021

Song added that the supply shortfall over 2019-2021 will keep CBD Grade A vacancy tight, below the 10-year average of 6.2%. This is even even after accounting for the impact of slowing net absorption in 2020 and 2021 amidst forecasts of slowing global economic growth.