Total net demand could reach 857,000 sqft amidst supply shortfall and healthy occupier demand.
CBD Grade A rents are expected to further rise by 8% for the full-year 2019 amidst supply shortfall and healthy occupier demand, according to a report by Colliers.
Total net demand is also likely to reach 857,000 sqft from occupiers for prime office space in the CBD.
“This should outstrip supply, potentially putting upward pressure on rents. In particular, we expect CBD Grade A net absorption should be driven mainly by technology and flexible workspace sectors’ expansionary demand,” said Tricia Song, head of research for Singapore at Colliers International.
Office rents may also see a small decline in 2021 before experiencing a rebound in supply by 2022, the report added.
In Q1, the average prime CBD office rent rose for the seventh straight quarter to $9.64 psf pm, up by 2.3% QoQ and 12.1% YoY, following a 15% YoY growth in 2018. Colliers also mentioned that CBD Grade A vacancy tightened significantly, to 3.9% from 5.4% as at the end of Q1.
Colliers also noted the Beach Road micro-market led rent growth in Q1, rising by 3.1% QoQ and 15.6% YoY to $8.78 psf pm. Rents at City Hall and Beach Road micro-markets grew faster than average, as landlord confidence was boosted by the upcoming rejuvenation in the precinct.
Average imputed capital value of CBD Grade A office properties rose 1.2% QoQ and 7.6% YoY to $2,453 psf as well. This is said to have reflected $953m worth of transactions seen in the quarter, pushing the rolling 12-month volumes of office and mixed-use commercial transactions to $5.39b, an 18% QoQ increase. Meanwhile, CBD Grade A implied yields remained flat, ranging between 3.2% and 3.7% on average.
“We expect capital values to trail the projected rent growth and hence yields to remain largely stable over 2019-2021, mainly due to the hefty weight of global capital directed towards gateway cities,” Jerome Wright, director for capital markets & investment services at Colliers International.
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