In Q3 2021, CBD Grade A office rent is at $9.59 psf, registering a modest quarter-on-quarter increase of 0.7% after five quarters of consecutive drops.

After five consecutive quarterly drops, Grade A office rents in Singapore’s Central Business District rebounded 0.7% quarter-on-quarter in the third quarter of 2021 to $9.59 per sq ft (psf), revealed Colliers International.

It attributed the rental growth largely to demand for quality office space within the New Downtown and Raffles Place as well as for newer buildings within Tanjong Pagar and Shenton Way.

Colliers noted that net absorption turned to a strong positive showing of 398,600 sq ft in Q3 2021, following a contraction of 12,600 sq ft in Q2 2021.

Technology companies continued to drive new demand. LinkedIn, for instance, expanded an additional 22,000 sq ft of office space within Marina Bay Financial Tower 2.

“Grade A office rents in Q3 2021 appeared to have bottomed out, and the office market has entered a phase of a U-shaped recovery,” said June Chua, Executive Director, Head of Tenant Representation at Colliers.

“Demand continues to be supported by the expansion of technology firms, as their intensified talent acquisition efforts have led to the growing need for good-quality office space to accommodate the additional headcounts.”

On investment sales, Colliers said total office or mixed-use office investment volumes fell 59.7% quarter-on-quarter to $519 million in Q3 2021, amid concern over the increasing COVID-19 cases within the city-state.

Only one major transaction was registered during the quarter, which is the $422 million sale of 61 Robinson to Rivulets Investments. 

Looking ahead, Colliers sees investment transactions picking up in Q4 2021, as the appetite for high-quality premium or freehold Grade A office buildings and Singapore’s long-term attractiveness to investors remain intact.

In Q3 2021, CBD Grade A office properties’ average imputed capital value remained flat quarter-on-quarter at $2,438 per sq ft (psf).

“Cap rates for Grade A office properties remained between 3.15% and 3.50% in Q3 2021 but could potentially tighten by 25bps in Q4 2021,” it said.

“We expect long-term growth in capital values to be at 2.5% per annum, in line with long-term rental growth, on the back of low interest rates and the increasing weighting of capital allocated to the gateway cities in Asia,” added Colliers.

Source: CommercialGuru, 6 Oct 2021