Average CBD Grade A office rents jumped 12.6% to hit 10-year high in Q2

Rates in Beach Road/Bugis Area rose 18% to $9.18 psf pm.

Average rental rates in Singapore’s central business district (CBD) rose 12% YoY and 3% QoQ to hit a 10-year high of $9.93 psf pm in Q2 2019, according to Colliers International. The price rise sealed the eighth straight quarter of increase for the segment.

Cumulatively, Singapore CBD Grade A rents grew 5.4% in H1. Colliers International believes that rates will be on track for a full year growth of 8%.

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Amongst micro-markets, growth was highest in Beach Road/Bugis as rates rose 4.6% QoQ and 18% YoY to $9.18 psf pm. This was buoyed by tight vacancies in office buildings in the area paired with landlords pricing in the upcoming rejuvenation in the precinct, with the completion of Guoco Midtown in 2022 and the redevelopment of Shaw Tower slated to be ready in 2023.

Meanwhile, office rents are projected to grow by 5% in 2020, continuing to moderate from the strong 15% YoY growth in 2018.

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“Tighter vacancies coupled with healthy space takeup amongst certain occupier segments, particularly technology and flexible workspace firms, continued to support rental growth in Q2 2019. Whilst we think the rent growth momentum remains strong, the pace of increase has probably peaked as tenants become more resistant to rent hikes,” Tricia Song, head of research for Singapore at Colliers International, said.

The average imputed capital value of CBD Grade A office properties rose 1.8% QoQ and 6.1% YoY to $2,498 psf, the firm said, noting that cap rates compressed 10-15bps to range between 3.15% and 3.5% on average.

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The quarter also saw office property transactions skyrocketed 176% QoQ to $2.63b, pushing the rolling 12-month volumes of office and mixed-use commercial transactions to $7.17b, up by 27% QoQ.

Colliers International noted two key deals during the quarter, including Chevron House sold by Oxley Holdings at $1.03b to US-based real estate fund AEW, and an agreement entered by Frasers Property to divest a 50% stake in Frasers Tower valued at $982.5m to Korea’s National Pension Service.