Office Market Recovery Picks Up Speed

The rebound in Singapore’s office market gained momentum during the fourth quarter of 2017, according to Colliers International’s “Tailwinds into 2018” report.“CBD premium & Grade A rents gained further traction in Q4 2017, rising 2.7 percent quarter-on-quarter compared to the previous quarter’s uptick of 0.6 percent,” said JieMei Tan, senior research analyst at the property consultancy.“This brings full year 2017 rent growth to 2.3 percent, the first annual increment since 2014.”In particular, monthly rents of premium and Grade A office space in the central business district (CBD) reached $8.21 psf during the quarter, while the average occupancy rate edged up by 0.5 percentage points to 91.9 percent.Premium office space in Raffles Place / New Downtown posted the highest quarterly and annual rental growth of 6.6 percent each to $9.83 psf per month on average.This was followed by Grade A premises in the said area, which rose 2.9 percent and 2.8 percent on a quarterly and annual basis respectively to $8.55 psf per month.Shenton Way / Tanjong Pagar, Marina / City Hall, Beach Road and Orchard Road recorded quarterly gains of 1.7 percent to 2.6 percent. These micro markets also saw annual rental growths of between 0.4 percent and 2.4 percent.In Q4 2017, leasing activity mainly consisted of relocations and expansions by smaller tech firms and professional services companies. Expansions also helped fill up offices vacated by tenants that have relocated to new premises. In fact, online travel company Agoda increased its rented space in Guoco Tower to 9,375 sq ft while flash storage maker Pure Storage took up 10,000 sq ft in the same property.Moreover, co-working space operators increased their net absorption for the whole of 2017. For instance, JustCo leased four floors totalling 57,000 sq ft in Marina Square, while China-based Ucommune has occupied 14,380 sq ft at Suntec Tower 2.Overall, the area occupied by such businesses surged by 42 percent to 2.1 million sq ft last year on an annual basis compared to a gain of 29 percent in 2016. However, growth this year is expected to moderate to 25 percent.Driven by firms scaling up amid rosier economic conditions, rents of prime office space in the CBD are expected to increase by 10 percent to 12 percent in 2018, then slow down to between three percent and five percent in 2019. Colliers also forecasts a marginal slide in 2020, before office rents recover over 2021 till 2022.Source: CommercialGuru, 12 Feb 2018