Grade A offices in CBD post highest annual rental growth since 2010
This is the highest annual growth since 2010, when it was 22%
Grade A offices in the Central Business District (CBD) posted the highest annual rental growth since 2010 due to tightening vacancies, according to real estate services company Colliers International.
The annual growth for last year was 14.9 per cent compared with 22 per cent in 2010 after the global financial crisis, said Colliers in a statement yesterday.
CBD Grade A office rental growth was 2.3 per cent in 2017.
Demand is expected to remain strong, especially amid the continued expansion of the technology sector and flexible work spaces.
The Shenton Way/Tanjong Pagar and Beach Road markets saw the largest rental increases last year, due to new development such as Guoco Tower near Maxwell Road and Duo near Bugis MRT station.
In Q4 2018, average CBD Grade A rent in Beach Road rose 18.6 per cent year on year to $8.52 per square foot per month (psf pm), while rent in Shenton Way/Tanjong Pagar increased 18.4 per cent year on year to $9.53 psf pm. This is against the backdrop of an overall rise in prime office rents.
Figures from the Urban Redevelopment Authority last month showed prime office rents turning in a robust performance for last year after a lacklustre 2017. Central region rents rose by 7.4 per cent last year, compared with 0.4 per cent in the preceding 12 months.
The upward trend is expected to continue, said Ms Tricia Song, head of research for Singapore at Colliers.
"In view of tight vacancy and a muted supply pipeline, we expect the steady upward rental trend to persist over the next two years," she said.
She is predicting average rents to rise 8 per cent year on year this year, and a further 5 per cent year on year next year.
"The supply shortfall over 2019 to 2021 should keep CBD Grade A vacancy tight, below the 10-year average of 6.2 per cent," said Ms Song, adding that this was after accounting for the impact of slowing net absorption in 2020 and 2021 due to forecasts of slowing economic growth.
Net absorption measures the amount of new space leased by tenants minus the space vacated, and reflects the property market's momentum.
Colliers is expecting new CBD Grade A supply from this year to 2021 to average 614,000 sq ft a year, which is about 2 per cent of stock a year. In contrast, new supply was about 10 per cent of stock in 2017.