SINGAPORE (EDGEPROP) - Office rents in the Central region grew by 2.4% q-o-q in the second quarter, according to data released by URA on July 22. This is higher than the 1.6% increase recorded in the previous quarter and marks a third consecutive quarter of growth.

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The stronger performance was underpinned by Singapore further easing workplace restrictions, with 100% of employees allowed to return to the office since April 26.

Catherin He, head of research, Singapore at Colliers, notes that the rental growth was broad-based, with median rents of both Category 1 and Category 2 office spaces increasing q-o-q by 0.9% and 4% respectively. Based on a basket of office buildings tracked by Colliers Research, rents of the Core CBD Premium & Grade A segment grew by 1.8% from the preceding quarter to $11.10 psf per month.

The islandwide office vacancy rate decreased by 0.8 percentage points to 12%, driven by positive net absorption of 258,334 sq ft in 2Q2022. This marks a reversal after five consecutive quarters of negative net absorption.

“This positive take-up was likely contributed by displacement activity, as well as new set-ups in the legal sector and non-bank financial institutions,” remarks Tricia Song, CBRE head of research, Singapore and Southeast Asia. Song adds there was also a decrease of 473,612 sq ft in office stock, likely due to the removal of AXA Tower as it commenced demolition works, which further supported lower vacancy rates.

Lam Chern Woon, head of research and consulting at Edmund Tie, highlights that notable leasing activity in 2Q2022 includes Amazon’s reported take-up of 369,000 sq ft of space at the upcoming IOI Central Boulevard Towers and Blackstone’s relocation from Tower 2 to Tower 1 at Marina Bay Financial Centre, doubling its office footprint. The upcoming Guoco Midtown development also gained traction in leasing activity during the quarter, with tenants like ConocoPhillips and Swiss Re coming on board.

Looking ahead, while the return-to-office momentum will continue propelling the office leasing market, there are signs that global economic headwinds are starting to impact some occupiers’ real estate decisions, which could temper office demand in 2H2022, says Tay Huey Ying, head of research and consultancy, Singapore at JLL.

Nonetheless, she anticipates full-year growth for CBD Grade A gross effective rents could still double the 4.3% clocked in 2021, given that they have already risen by 5% in the first half of the year.

Leonard Tay, head of research at Knight Frank Singapore, believes that office rents will hold firm despite a possible recession, backed by demand driven by the “flight to safety” to Singapore by private wealthy, corporates and MNCs. Knight Frank maintains a forecast of 3% to 5% growth in rents for the whole of 2022.

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