Business parks’ submarkets rental gaps widens
City Fringe rents increased whilst the rest of the island remained flat.
The gap between the two submarkets of business park properties continues to widen in the third quarter (Q3) of 2022, with the average business park rents in the City Fringe increasing by 0.8% quarter-on-quarter (QoQ) to $6.05 psf/month whilst rents in Rest of Island remained flat at $3.65 psf/month according to CBRE
CBRE says that due to rising inflation and utility costs, some landlords have raised service charges effective during the quarter. However, this may not have been passed through in the form of higher rents (which include service charges) as demand remains highly price-sensitive, especially for assets with high vacancies.
Islandwide vacancies increased to 14.2% in Q3 2022 whilst city fringe vacancies declined to 3.6%.
“Higher concentration of supply pipeline could continue to exert pressure on the Rest of Island submarket. On the other hand, rents in City Fringe are expected to remain resilient given the lack of new options and potential spillover from the strong office rental recovery. Going into 2023, macroeconomic headwinds and a slowdown in the tech sector could weigh on demand,” CBRE said.