Singapore Grade A office vacancy rate increases to 5.1% in Q2

CBD office rents also rose 1.6% q-o-q.

Data from Cushman & Wakefield reveal that CBD Grade A office rents in Singapore rose 1.6% qoq in Q2 2022. Vacancy rates likewise increased to 5.1% from 4.6% in Q1 2022 due to a lag between relocations and lease negotiations, but analysts expect this to decline by Q3. 

Decentralised offices also rose by 0.4% qoq growth in Q2 2022 as vacancy rates tightened to 5.3% from 5.6% in Q1 2022.

Here’s more from Cushman & Wakefield:

“Despite rising recession risks, Singapore’s pro-business environment and its ongoing economic recovery could appeal to firms seeking the flight to safety in times of uncertainty, and we anticipate the office market to continue growing in the second half of 2022, albeit at a slower pace,” said Mark Lampard, Head of Head of Regional Tenant Representation at Cushman & Wakefield. 

“We expect CBD Grade A office vacancy rates to tighten towards 4% and rents to grow 5.4% for the whole of 2022 due to new demand from wealth and management firms, coupled with continued demand to return to the office. Decentralised offices are also expected to see higher demand as cost-conscious tenants move towards lower-cost options outside of the CBD, and rents are expected to increase by 3.2% yoy.”

Rising Tech Demand May See Temporary Cooling

The tech sector drove about 25% of new lease transactions in H1 2022 – second only to financial firms which drove about 40% of new lease transactions in H1 2022. Notable tech transactions in the CBD this year so far include online fashion retailer Shein’s lease at Marina Bay Financial Centre Tower 3 and digital asset company Amber Group’s lease at Frasers Tower. However, future tech demand could be weighed down by tightening financing conditions.

“Technology firms are a key office demand driver in Singapore and at the forefront of the government plans for the development of the digital economy. However, the impending rise in interest rates has roiled equity markets and saw a steep devaluation of tech companies,” said Wong Xian Yang, Head of Research, Singapore at Cushman & Wakefield. “As such, office demand from tech could cool over the short term. Nonetheless, well-capitalised and growing tech firms could still drive pockets of demand, given strong long-term tech growth prospects.”