Singapore office rents to grow up to 30% by 2025, says JLL

SINGAPORE, 28 September 2021 – Singapore’s CBD Grade A office rents are expected to stay on a growth trajectory over the next few years, potentially gaining an increase of 25-30% by 2025, according to JLL’s latest ‘Singapore office rents: a long runway for growth’ whitepaper.

The research report addresses common questions about the relevance of offices in a post-pandemic world and discusses new drivers of demand for Singapore’s office space. It also reveals that CBD Grade A office stock is reaching a steady state, with growth likely to lag behind demand in the medium- to long-term.

Ms Tay Huey Ying, Head of Research and Consultancy for JLL Singapore says: “As we expect the government to focus on developing suburban hubs to bring jobs closer to homes, there is likely to be little or no office land releases in the CBD in the short to medium term. Guoco Midtown and Central Boulevard Towers are likely the last of fresh office injections on greenfield land within the CBD. Beyond that, we may see a reduction in office spaces as more older buildings are converted to mixed-use developments to take advantage of the CBD Incentive Scheme.”

JLL is optimistic that demand for office will remain healthy, anchored on its integral role as the primary place of work. Additionally, Singapore remains a safe place to live and operate amid the pandemic, drawing technology firms, wealth management and family offices amongst others, to set up offices in the city.

Ms Michelle Tee, Director, Research & Consultancy, JLL Singapore, adds: “Singapore’s economic growth continues to spur business expansion in growth sectors such as fintech, asset management and healthcare. This would also translate to a rise in demand for office spaces as businesses would need to increase hiring and accommodate the rising headcount to cope with expansion.”

Affirming that Singapore’s office leasing market is on the mend, CBD Grade A office rents rose a second consecutive quarter in 3Q21 and at a slightly accelerated pace than the second quarter, as JLL’s preliminary estimates showed.

Following the 1.2% quarter-on-quarter (q-o-q) growth in 2Q21 that ended five straight quarters of declines, the average monthly gross effective rents of Grade A CBD office space are estimated to have inched up another 1.5% q-o-q to SGD 10.05 per sq ft in 3Q21, from SGD 9.91 psf in 2Q21. Rent growth was broad-based across all four CBD submarkets tracked by JLL.

Ms Tee explains: “Market sentiment had generally stayed positive in 3Q21 despite another round of Phase 2 (Heightened Alert) from 22 July to 18 August 2021 where work-from-home returned as the default work mode. Businesses are generally optimistic about the prospects of a successful transit for Singapore to live with endemic COVID-19 given the steady climb in the vaccination rate to above 80% by September 2021.”

Over at Singapore Land Tower where refurbishment works could last for about two years, law firm Lee & Lee reportedly secured a lease to move to 25 North Bridge Road, a premise that is located closer to the Supreme Court building and will allow Lee & Lee to experiment with a hybrid work model in fitting out their new space.

Ms Tay concludes: “Grade A CBD office rents have already risen by 2.4% in the first three quarters of 2021. With no signs of slowing rent growth, we have upgraded our full-year rent forecast marginally, from 2-3%, to 3-4%. Underpinned by strong demand drivers, this also gives us much reason to believe that Singapore’s office rents will continue to make a good upward run in the near to medium-term.”

For more information, download ‘Singapore office rents: a long runway for growth’ here.