Singapore’s Q3 office rents exceed pre-pandemic peak to a near 14-year high: JLL

SINGAPORE, 28 September 2022 – It took Singapore’s CBD Grade A office rents a mere 18 months to recover the grounds lost due to the COVID-19 pandemic, according to JLL.

The real estate consultancy’s research showed that the gross effective rent for CBD Grade A office space rose 2.9% q-o-q to average at SGD 11.06 per sq ft per month in 3Q22, from SGD 10.74 per sq ft per month in 2Q22. This has surpassed the pre-pandemic peak of SGD 10.81 psf per month recorded in 4Q19 and is the highest since the SGD 12.55 posted in 4Q08.

Source: JLL Research

Ms Tay Huey Ying, Head of Research and Consultancy for JLL Singapore elaborates, “The office leasing market has withstood the pressure of external economic headwinds better than expected. Net absorption of Grade A CBD office space stayed elevated, coming in just marginally below the 17-quarter high recorded three months ago, and way above new supply from the completion of Hub Synergy Point. This drove the 3Q22 average gross effective rent for CBD Grade A offices up by a better-than-expected 2.9% q-o-q.”

Mr Andrew Tangye, Head of Office Leasing and Advisory for JLL Singapore adds, “There is some growing caution amongst occupiers in light of the global economic headwinds. However, the office leasing market is still riding on the tailwind of the economy re-opening following the transit to COVID-19 endemicity. The market activity of the past nine months proves beyond doubt that corporates regard physical office as a critical component of the work eco-system, be it hybrid or not. In fact, the disperse workforce arising from hybrid working has elevated the importance of physical offices as the anchor for building corporate values, instill sense of belonging in employees, and to stimulate cross-team collaboration.”

The office investment sales market stayed active, with 17 assets worth SGD 5 million and above changing hands in 3Q22, up from eight in the preceding three months. However, due to smaller deal sizes, cumulative investment sales value amassed dipped for the third consecutive quarter to SGD 1.27 billion in 3Q22, 19.6% lower than the SGD 1.57 billion collected in 2Q22.

Ms Ting Lim, Head of Capital Markets for JLL Singapore comments, “Investors remain keen on Singapore office assets but soaring interest rates have moderated their appetite leading to more selective acquisitions. The successful conclusion of the sale of Income at Raffles for nearly SGD 1 billion in the quarter is testament to the sustained strong demand for premium commercial opportunities on the back of longer term positive rental upside and high barriers to entry.”

On the outlook for the office property market, Ms Tay opines, “Grade A CBD rents could close 2022 with a full-year growth of around 10%, accelerating from the 4.3% clocked in 2021. The downcast skies could weigh down demand for office space in 2023 and soften rent growth to within 5%. This takes into consideration the expected intense competition for tenants to backfill space vacated by occupiers upgrading to new projects such as Guoco Midtown scheduled for completion by the end of 2022 and IOI Central Boulevard Towers in 2023. We remain upbeat that CBD Grade A rental growth momentum is poised for another strong rebound once the global economic headwind recedes in light of limited new supply after 2023.”