Singapore office market recovery well underway: Colliers
The healthy leasing need for the CBD premium and Grade-A workplace section is backed by corporates’ preference for more recent office buildings with high-quality requirements, in preparation for workers returning to the office as well as the expected pick-up in company activity.
Premium and Grade-An office complex in the CBD also continued to see strong leasing demand, with positive net absorption of around 134,000 sq ft in 1Q2022. On the other hand, the job rate tightened to 3.3%.
The segment is expected to proceed expanding in the coming months, supported by a broad-based economic recovery and also return-to-office momentum. Colliers prepares for rentals for CBD premium as well as Grade-An offices to expand by 4% to 5% in 2022.
On the other hand, on the investment front, typical funding values in the sector enhanced 5.6% q-o-q in 1Q2022, striking $2,850 psf. Correspondingly, net returns pressed by 0.1% q-o-q to 3.4%, with cap rates being available in between 3% and 3.6% in the last quarter.
Leasing deals throughout 1Q2022 consisted of style seller Shein using up 21,000 sq ft at Marina Bay Financial Centre Tower 3. German chemical business BASF will certainly be moving from its existing properties at Suntec Tower 1 to the upcoming Guoco Midtown.
Colliers suggests occupiers take early activity on future workplace decisions, as the market shifts in favour of property managers. Landlords of workplace assets with out-of-date requirements should take into consideration repurposing or redeveloping their properties, to future-proof them.
In terms of the CBD micro-markets tracked by Colliers, office complex in the Raffles Place/New Downtown location, as well as the Shenton Way/Tanjong Pagar area, saw the highest possible development in rentals, raising 2.3% q-o-q to get to $11.96 psf.
On the back of tight yields as well as rate of interest uncertainties, financiers are recommended to concentrate on energetic asset maintenance or improvement to attain return targets.
Progressing, Colliers anticipates workplace properties in prime areas to proceed bring in a wide range of funding, underpinned by a healthy leasing market expectation, restricted new supply, as well as the resuming of Singapore’s borders.
A workplace study by Colliers for 1Q2022 shows that the recovery momentum in the Singapore workplace market is well underway. Premium as well as Grade-An office rents in the CBD climbed for a 3rd consecutive quarter in 1Q2022, boosting 1.5% q-o-q to get to $10.26 psf, supported by healthy leasing demand. This notes the fastest speed of development considering that rentals recoiled in 3Q2021.