CBD Grade A rents to increase 8% this year

Colliers International expects CBD Grade A rents to grow further by eight percent for the entire year on the back of healthy occupier demand and supply shortfall, reported Singapore Business Review.

Total net demand is also forecasted to hit 857,000 sq ft from occupiers for prime office space within the CBD.

“This should outstrip supply, potentially putting upward pressure on rents. In particular, we expect CBD Grade A net absorption should be driven mainly by technology and flexible workspace sectors’ expansionary demand,” noted Tricia Song, head of research for Singapore at Colliers International.

Colliers also expects office rents to drop marginally by 2021 before witnessing a rebound in supply in 2022.

During the first quarter of 2019, average prime CBD office rent rose 2.3 percent quarter-on-quarter to $9.64 psf per month – or its seventh consecutive quarterly increase.

CBD Grade A vacancy also contracted from 5.4 percent to 3.9 percent as at end-Q1, said Colliers.

The Beach Road micro-market led rental growth during the quarter, increasing 3.1 percent quarter-on-quarter to $8.78 psf per month. With landlord confidence boosted by the upcoming rejuvenation of the precinct, the City Hall and Beach Road micro-markets saw rents increase faster than average.

The average imputed capital value for CBD Grade A office properties also grew 1.2 percent quarter-on-quarter and 7.6 percent year-on-year to $2,453 psf, while implied yields remained flat at between 3.2 percent and 3.7 percent on average.

“We expect capital values to trail the projected rent growth and hence yields to remain largely stable over 2019-2021, mainly due to the hefty weight of global capital directed towards gateway cities,” said Jerome Wright, director for capital markets & investment services at Colliers International.

Source: 24 April 2019, CommercialGuru