Singapore business park submarkets register widening rental gap | Realestate Asia

Singapore business park submarkets register widening rental gap

City Fringe monthly rents are at $6psf whilst Rest of Island are at $3.65psf.

A recent report by CBRE reveals that occupier interest for business parks in Singapore was relatively steady, though overall leasing demand was capped by tight occupancies in the City Fringe submarket. This led islandwide net absorption to increase slightly by 13,178 sq. ft. in Q2 2022. 

The vacancy rate for the City Fringe submarket, according to CBRE data, declined for the fourth consecutive quarter to 4.4% in Q2 2022, from 4.7% in Q1 2022 while that for the Rest of Island submarket inched up to 18.2%. This caused a further widening of performance between the two submarkets. CBRE Research also observed that some developments in the Rest of Island submarket were undergoing AEIs to improve occupancies. 

Here’s more from CBRE:

Similar to previous quarters, there was steady leasing interest from pharmaceutical and biomedical companies which were actively seeking to expand their R&D and lab facilities. It was noted that their preference was mainly confined within the City Fringe. Less downsizing activity was seen for renewals among the banking sector, which is a positive sign for the overall business park sentiment. 

Widening rental gap between City Fringe and Rest of Island 

Continued take-up in the City Fringe submarket led rents to increase for the fifth consecutive quarter by 0.8% q-o-q to $6.00 psf/month. For the Rest of Island submarket, rental performance was more muted with rents maintaining at $3.65 psf/month as landlords continued to prioritise raising occupancy. 

High supply concentration risk in Rest of Island 

The average annual pipeline supply over the next three years will be at a historical high at 1.53 mil sq. ft. per annum, with higher concentration risk in the Rest of Island submarket. This could potentially exert more pressure on Rest of Island rents.

On the other hand, rents in City Fringe are expected to remain resilient given the lack of new options. Looking further ahead, business parks could benefit from the strong office rental recovery, where the widening rental gap between office and business parks could lend additional support to the latter.

 

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