Singapore office market rides the return-to-office wave: JLL

SINGAPORE, 30 March 2022 – Singapore’s CBD Grade A office rent growth momentum continued unabated in 1Q22, according to JLL.

The real estate consultancy’s research showed that the average gross effective rent for Grade A CBD office space rose 2.3% q-o-q from SGD 10.23 psf/month in 4Q21 to SGD 10.46 psf/month in 1Q22. This is the fastest pace of growth since rents turned around in 2Q21. Altogether, rents have recovered by 6.9% from the recent bottom of SGD 9.79 psf/month in 1Q21.

Ms Tay Huey Ying, Head of Research and Consultancy for JLL Singapore shares, “1Q22 rent growth was the third consecutive quarter of accelerated growth. This had been underpinned by strengthening demand for office space as corporates acknowledge the critical role of physical offices in their overall workplace strategy even as the hybrid-working conversation continues.”

Ms Tay adds, “Amongst the four CBD submarkets tracked by JLL, Marina Bay, which is home to relatively new and good quality office developments, experienced the sharpest q-o-q rent growth of 3.2% in 1Q22, rising from SGD 11.77 psf/month in 4Q21, to SGD 12.14 psf/month in 1Q22. This is driven by occupiers’ preference for newer and good quality developments as they make concerted efforts to ensure employees are returning to healthy working environments and sustainable workplaces.” 

Mr Andrew Tangye, Head of Office Leasing and Advisory for JLL Singapore elaborates, “Active demand for office space continues to come from the technology, consumer and non-bank financial sectors. Singapore’s tech hub status has attracted a number of major players who continue to grow whilst others look to establish a regional presence here. However, what stood out in 1Q22 is a clear trend of demand broadening to encompass a wider range of industries. This comes as more businesses position themselves for growth amid the recovering global and Singapore economies.”

Major leasing deals in 1Q22 include KPMG taking up circa 100,000 sq ft in Asia Square Tower 2. The upcoming Guoco Midtown is also understood to have signed on more tenants in 1Q22.

On the capital market front, investors continued to be drawn to Singapore office assets. Major deals sealed in 1Q22 include the SGD 297 million investment into Capital Square by SMFL Mirai Partners, a subsidiary of Japanese leasing company Sumitomo Mitsui Finance, together with real estate asset manager Kenedix and ARA Asset Management. AEW was also reported to have sold 55 Market Street to an indirect wholly-owned Singapore-based real estate unit of Tokyo-based Kajima Corporation, for nearly SGD 287 million. More recently, CapitaLand Integrated Commercial Trust and CapitaLand Open End Real Estate Fund have entered into an agreement to acquire 79 Robinson Road for SGD 1.26 billion.

JLL expects the office market to continue benefitting from the back-to-office recovery momentum and maintains its forecast that 2022 CBD Grade A rent growth to at least double the 4.3% clocked in 2021.

Ms Tay explains, “Singapore is making definitive moves to transiting to living with endemic COVID. Amongst other things, 75% of employees who can work from home are allowed to return to the workplace from 29 March 2022, up from 50% that has been in place since 1 January 2022. Barring new variants, it should not be long before all employees are allowed to return to the workplace. The prospects of the CBD returning to its former vibrant self should spur more occupiers to secure office spaces in preparation for their employees’ return and position their businesses for growth as Singapore’s economy and international borders open further. At the same time, we are expecting some companies to abort plans to downsize as business activities pick up and employees start to stream back to the office.”

Ms Ting Lim, Head of Capital Markets for JLL Singapore concludes, “Underpinned by the upbeat leasing market outlook and the latest restrictions on individual strata subdivision, which raises the appeal of office assets in designated zones, the Singapore office investment market looks set to continue to attract a wide range of capital in 2022. Assets in prime locations will continue to see capital growth given the scarcity of opportunities.”