Grade A office rents to see slowest growth in four years

Rents are tipped to grow by only 1% YoY in 2020.

Grade A office rents in Central Business District (CBD) are projected to inch up by 1% YoY in 2020, according to a Colliers report. Despite being on the upward trend, this could be the slowest year of growth in four years.

Rents rose by 7% YoY for the whole of 2019, followed by a 15% increase in 2018, and a 2.3% growth in 2017. Over the past three years, CBD Grade A office rents have jumped 26%.

Colliers also predicts that rents will worsen in 2021, as it will dip by 4%. But despite the slide of rents ahead, Singapore will still remain as an attractive occupier market over a five-year period,of 2020-2024, with a 3.3% growth per annum on the side of average rents.

On the supply side, CBD Grade A vacancy tightened to 3.4% in 2019 from 5.4% in 2018. This went below the 10-year average of 6.2%, and Colliers expects the limited supply of office space will keep vacancy rates down until an anticipated supply hike in 2022.

“In 2020, we expect the demand for office space to continue to be led by the technology and flexible workspace sectors, albeit at a slower rate,” said Tricia Song, head of research for Singapore at Colliers International.

There will be opportunities for occupiers to plan ahead and make their moves this year, may it be renewals or relocations, as the office rental growth is likely to ease relative to the stronger increases seen in the past two years, according to Collier’s head of occupier services Rick Thomas.

The next wave of office supply coming in 2022 could trigger ‘flight to efficiency’ as some occupiers may look to relocate from their existing premises to new builds, adds Thomas.