Q2 records highest vacancy rates for CBD Grade A offices in 3 years

Vacancy rates surged to 4.6% in Q2 2021.

Vacancy rates surged to 4.6% in the second quarter (Q2) of 2021, the fifth consecutive quarterly increase recorded and the highest recorded vacancy rate for the Central Business District (CBD) Grade A office market since the first quarter (Q1) of 2018, according to a report by Cushman & Wakefield.

Net demand for CBD Grade A office spaces, however, has turned positive at 68,000 square feet in the first half (H1) of 2021 on the back of a relatively low base of 223,000 square feet in the second half (H2) of 2020.

Cushman & Wakefield said that amidst the K-shaped economic recovery, technology and finance tenants were the key drivers for CBD Grade A office space, accounting for the bulk of new leases signed in H1 2021. 

Although banking tenants have continued to right size and trim spaces, many of the vacated spaces have been taken up or pre-committed by technology and finance occupiers that have leveraged on lower rents amidst the pandemic to expand and position for the economic recovery.

“While the overall CBD Grade A office net demand has turned positive, it remains relatively weak. Nonetheless, this is a stark contrast to a contraction in demand of 223,000 square feet in H2 2020. However, net supply has continued to outpace net demand, at 359,000 square feet, leading to a rise in vacancy rates. The increase in net supply was attributed to Afro-Asia Building and the addition of Lazada One (formerly known as 5 One Central) to the CBD Grade A basket,” Wong Xian Yang, head of research, Singapore at Cushman & Wakefield said.

Meanwhile, H2 2021 outlook remains positive as Cushman & Wakefield said that CBD Grade A office rents are poised to recover increasing by up to 1 to 3%, driven by strong economic rebound, vaccine rollout, and steady demand from thriving tech firms.