Singapore CBD Grade A office net demand at an all-time high since 2019

Net demand hit 580,000 sq ft in Q3 2022.

CBD Grade A office rents rose 1.8% qoq in Q3 2022 according to Cushman and Wakefield, amidst a flight to quality and a tight supply situation. Vacancy rates tightened to 3.6% in Q3 2022 from 5.1% in the last quarter, driven by tech and finance occupiers. 

“CBD Grade A net demand in Q3 2022 reached 580,000 sf, a quarterly high since Q4 2019 and exceeding the 112,000 sf of net supply stemming from the redeveloped Hub Synergy Point,” the analyst added.

Here’s more from Cushman and Wakefield:

As CBD Grade A vacancy rates tighten, demand has spilled over towards other markets. The CBD Grade B office rents rose by 1% qoq as vacancy rates fell to 7.8% in Q3 2022 from 9.4% in the last quarter. Office rents in decentralised markets (City Fringe and Suburban) also climbed 1.3% qoq in Q3 2022 amidst vacancy rates tightening to 5% in Q3 2022 from 5.3% in the prior quarter.

Growth in a New Economic Reality 

Office rental growth is expected to slow towards end-2022 and into 2023 as businesses grow wary of a potential recession. Technology firms, a key office demand driver, have largely become more cautious on the back of a tightening financing landscape. Some however have continued to expand, reflecting their long-term confidence in Singapore. 

Amazon is taking up about 369,000 sf of office space at IOI Central Boulevard Towers, and ByteDance has further expanded in the CBD. Non-bank financial and professional services firms are also driving demand for small-mid sized offices and co-working spaces in the CBD. 

Upcoming new Grade A office developments have witnessed a healthy pre-commitment rate. Guoco Midtown’s office tower has attained about 60% pre-commitment rate (including advanced negotiations) as of end-Aug 2022, and IOI Central Boulevard Towers (2023) is about one-third preleased. 

Despite a darkened outlook, the Singapore office market is anchored on a strong position. It enjoys a tight supply situation over the short- to mid term and a resilient underlying office demand given its status as a global business and tech hub. 

Against this backdrop, CBD Grade A office rents are expected to grow by 5.5%-6.5% yoy this year, and slower in 2023 at about 2%-4% yoy.