Singapore prime office values hold steady in Q1

Small deals to dominate the first half.

The capital values of premium and Grade A office assets in Singapore’s core central business district remained flat last quarter to signal muted dealmaking activity and strong holding power of asset owners, according to Colliers.

CBD premium and Grade A office capital values were nearly unchanged at $3,100 per square foot last quarter from the previous quarter, which the report traced to a lack of transactional evidence and holding powers of the owners.

With the 0.7% uptick in rents that quarter, net yields edged up by 3 percentage points to 3.51%.

Last quarter only saw small-scale deals such as strata office transactions at GB Building and Vision Exchange, and Colliers expects this trend to continue as the high-interest rate environment makes it difficult for potential buyers to borrow funds for their big-ticket purchases.

“Deal size is expected to remain small, with higher interest in strata offices due to their more manageable quantum, and as buyers exhibit prudence with the higher cost of capital and uncertainty,” it said.

Colliers sees dealmaking picking up in the second half of the year when interest rates go down.

The average vacancy rate of prime and Grade A offices in the core CBD was unchanged at 2.6% last quarter compared to the previous three months, but it was still lower than the sector’s 3.4% historical average in the past five years from 2019 to 2023.

ALSO READ: Colliers forecasts slight compression in Singapore's cap rates

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