Grade A office rents up 12.7% in Q1

Average rents of Grade A office space in Singapore’s central business district (CBD) rose 12.7 percent in Q1 2018 on an annual basis, representing four straight quarters of rental growth after values reached rock-bottom in the same period a year ago, according to JLL’s initial estimates.“This has been stronger than the rebound seen in 2013 wherein over a similar four-quarter period from the bottom, rents edged up only 7.4 percent. Given that the market will be void of new Grade A supply in the CBD in 2019, the current rent recovery will have more legs and could possibly surpass the last in magnitude and length,” said JLL Singapore research head Tay Huey Ying.In particular, the Marina Bay submarket posted an annual gain of 15.5 percent. On a quarterly basis, monthly average office rents increased by three percent from $9.23 psf to $9.51 psf, with that in Marina Bay rising by 3.3 percent from $10.49 psf to $10.84 psf in Q1 2018. However, these are slightly lower than the growths of 4.2 percent and 4.9 percent respectively in the last quarter of 2017.As for the other submarkets – Raffles Place, Shenton Way/Tanjong Pagar and Marina Centre – quarterly rental growth ranged between 2.7 percent and 3.0 percent.Moreover, JLL noted that the average vacancy rate of Grade A office space in the CBD declined from the recent peak of 11.9 percent in Q3 2017 to 8.1 percent in the quarter under review.The appetite for office space was so strong that over 60 percent of the 0.8 million sq ft of net lettable space are estimated to be already pre-committed in Frasers Tower and 18 Robinson, the only two office projects due for completion this year.In fact, property consultancy CBRE revealed that energy firm Total leased about 125,000 sq ft of space in Frasers Tower. Japanese cosmetics maker Shiseido also agreed to occupy 55,000 sq ft of space there, while Sumitomo Corp and ABN Amro have taken up 40,000 sq ft and 43,000 sq ft respectively. These are among the notable leasing activities in Singapore over past six months.“We expect leasing demand to stay robust throughout 2018, driven by companies from a broad industry base looking to upgrade their premises. Co-working operators, in particular, are still bullish about demand and remain keen to set up new centres,” said JLL Singapore head of leasing Chris Archibold.“However, as many of the large occupiers with lease expiries before 2019 have already locked in their accommodation, we expect leasing activity in 2018 to be dominated by smaller occupiers, or those with lease commencement dates more than 18 months away.”Looking ahead, JLL’s Tay said there is a possibility that monthly average rents of Grade A office space in the CBD could rise by about 10 percent from $9.51 psf currently to Q1 2015’s last high of $10.56 psf within the next 12 months due to strong leasing demand.CBRE expects Grade A office rents to increase by 9.6 percent for the whole of 2018, and the entry of around 1 million sq ft of primary vacant office over the next three years.Source: CommercialGuru. 29 March 2018