CBD Premium and Grade A office rents inched up 2.6% in Q2

CBD rents could further spike to around 10% to 12% in 2018.

Central Business District (CBD) Premium and Grade A office rents rose 2.6% QoQ to $8.82 psf pm in Q2 2018, Colliers’ International said. The increase is slower than the 4.8% QoQ growth recorded in Q1.

“We view the slower pace of rent increase as a momentary consolidation following the leasing market’s rapid recovery which saw an 11% YoY growth from Q2 2017,” Colliers International head of office services Duncan White commented.

According to the firm, Singapore CBD rents could increase to around 10% to 12% YoY for 2018 amidst the tighter vacancy in the CBD Premium and Grade A office segment. This can also be pushed by the demand for spaces amongst financial, professional services, technology and flexible workspace firms

However, the firm said that rent hikes could cool down to around 5% to 7% YoY rise by 2019.

“Given that office rents have climbed by some 7.5% YTD, Colliers expects steady rental upticks to continue over the rest of 2018,” the firm commented.

Meanwhile, all office micro-markets, including Grade B buildings in the CBD also recorded rental growth in Q2. Raffles Place/New Downtown (16.1%) and Shenton Way/Tanjong Pagar (15.4%) led the largest YoY hikes.

“This was likely driven by the newly completed Marina One in the New Downtown and Frasers Tower in Tanjong Pagar, which has consistently transacted in excess of $10 on effective rents” Colliers International explained.

In addition, the firm noted that the stream of anchor tenants filling up Paya Lebar Quarter’s office towers is positive for City Fringe districts.

“The strong rental upturn over 2018-2019 should accentuate the attractiveness of decentralised micro-markets, and prompt occupiers to consider City Fringe Grade A developments that can bridge the gap between cost and value,” Colliers International senior analyst JM Tan said.

In Q2 2018, prime office rents in the city fringe advanced 9.1% YoY to $7.28 psf pm which is an increase of 3.9% against Q1.