Singapore’s office market shows recovery in 1Q2021: CBRE

SINGAPORE (EDGEPROP) - Amid positive net absorption and tightening vacancy, the office market has begun to show signs of recovery, according to CBRE Research. Recovery in the office sector over 1Q2021 was led largely by leasing demand for Grade-A office buildings.

CBRE observes that there has been the emergence of a two-tier market — a Grade-A Core CBD market and Grade-B islandwide office market — as occupiers focus on Grade-A office buildings within the CBD, while the Grade-B office market continues to grapple with higher vacancy rates.

Rents of the Grade-A (Core CBD) office remained stable q-o-q at $10.40 psf per month (pm) in 1Q2021, while Grade-B (Core CBD) rents registered further decline of 1.3% q-o-q to $7.80 psf pm.

The Grade-A (Core CBD) market registered a positive net absorption in 1Q2021, as occupiers capitalised on the declining rents and took flight to prime office buildings, observes CBRE. Key demand drivers include firms in the technology and financial services industries such as asset management firms, and to a smaller extent, family offices, it says.

Overall, the office market registered a positive net absorption of 0.13 million sq ft in 1Q2021 after three consecutive quarters of negative net absorption. This stemmed largely from Dyson Ltd’s lease commitment at St James Power Station which was added to total office stock in 1Q2021.

“Over the course of 2021, office demand is expected to be supported by gains in employment and a gradual recovery of Singapore’s economy. In addition, office rents will be supported by a tight supply pipeline,” says Catherine He, associate director of Research, Southeast Asia, at CBRE.

However, CBRE says that the office-sector recovery will not be uniform. As large corporates leverage the short-term market sentiment to upgrade their office location, the Grade-A market is expected to benefit from this trend. However, CBRE expects the Grade-B market to face further pressure from emerging vacancy.

“A silver lining for the office market is the government’s latest announcement that work-from-home is no longer the default and up to 75% of employees are able to return to the workplace with effect from April 5,” says David McKellar, co-head of office services, CBRE Singapore.

“This bodes well for the office market as more firms are gradually planning for the return of employees to the workplace and this reinforces the importance of the physical office,” he says.