Office rents chart higher ground in 1Q18
SINGAPORE, 28 March 2018 – Singapore's Grade A CBD office rent recovery entered its fourth consecutive quarter rising 3.0 per cent quarter-on-quarter (q-o-q) in 1Q18 to SGD 9.51 per sq ft per month, JLL's preliminary estimates show.
Rent growth in 1Q18 was broad-based across all sectors, with the Marina Bay sub-market continuing to enjoy a competitive edge. The average monthly gross rent of Grade A office space in Marina Bay climbed by 3.3 per cent q-o-q to SGD 10.84 per sq ft in 1Q18 from SGD 10.49 per sq ft three months ago. The remaining sub-markets (i.e. Raffles Place, Shenton Way/Tanjong Pagar and Marina Centre) posted rent growth ranging between 2.7 per cent and 3.0 per cent q-o-q.
Average monthly gross rent for Grade A office space in the CBD
|CBD overall||Marina bay Sub-market|
|Average monthly gross rent(per sq ft)||4Q17||SGD 9.23||SGD 10.49|
|1Q18*||SGD 9.51||SGD 10.84|
|Total recovery to date (1Q17 to 1Q18)*|
|* Preliminary estimates||Source: JLL Research|
The 3.0 per cent q-o-q growth in the overall CBD Grade A office rents is a slight moderation from the 4.3 per cent and 4.2 per cent q-o-q increases recorded in 3Q17 and 4Q17, respectively. This is likely due to the higher rental base, given that rents have recovered by a strong 12.7 per cent from its bottom in 1Q17.
Leasing momentum remained robust in 1Q18. More than 60 per cent of the 0.8 million sq ft of net lettable space in Frasers Tower and 18 Robinson – the only two office developments due for completion in 2018 in the CBD - are estimated to be already pre-committed. Moreover, according to JLL's research, the average vacancy rate of Grade A office space in the CBD had fallen rapidly from the recent peak of 11.9 per cent in 3Q17, to 8.1 per cent as of 1Q18.
Mr. Chris Archibold, Head of Leasing, JLL Singapore, observes: "We expect leasing demand to stay robust throughout 2018, driven by companies from a broad industry base looking to upgrade their premises. Co-working operators, in particular, are still bullish about demand and remain keen to set up new centres. However, as many of the large occupiers with lease expiries before 2019 have already locked in their accommodation, we expect leasing activity in 2018 to be dominated by smaller occupiers, or those with lease commencement dates more than 18 months away."
Ms. Tay Huey Ying, Head of Research and Consultancy for JLL Singapore, forecasts: "Underpinned by healthy demand, the squeeze for Grade A office space will worsen in light of the two schemes scheduled for completion this year are already more than 60 per cent pre-committed. Rents will continue to face upward pressure. There is potential for Grade A office CBD average monthly gross rents currently standing at SGD 9.51 per sq ft to reach the last high of SGD 10.56 per sq ft recorded in 1Q15 within the next 12 months given the 10 per cent gap today."
Ms. Tay concludes: "Grade A CBD office average monthly gross rents have recovered 12.7 per cent over four quarters as of 1Q18. This has been stronger than the rebound seen in 2013 wherein over a similar four-quarter period from the bottom, rents edged up only 7.4 per cent. Given that the market will be void of new Grade A supply in the CBD in 2019, the current rent recovery will have more legs and could possibly surpass the last in magnitude and length, barring the materialisation of downside risks such as a full-blown trade war between the United States and China. Grade A office rents surged a total of 23.2 per cent over nine quarters in the 2013/14 upcycle before declining in 2Q15."