Singapore “safe haven” reputation to prop up prime grade office rents

Full-year office rent growth will come between 3% up to 5%.

Prime grade office rents in Singapore are expected to hold firm even in the event of a recession, partly thanks to Singapore’s “safe haven” reputation, according to a report by Knight Frank.

Rents in the Raffles Place / Marina Bay precinct rose 1.1% in Q2 compared to the previous quarter, averaging $10.36 per square feet (psf). Rental growth in the precinct has already grown by 2.3% in just the first six months of 2022, and 3.8% since rents bottomed out in Q3 2021. Demand and occupancy levels in this precinct also remained healthy amidst a limited supply of office space, even improving to 95.4%.

Demand for prime grade office rents, in general, is expected to hold steady by a “flight to safety” to Singapore by corporates affected by tensions in other parts of the world, Knight Frank said.

“As Singapore is known for its compelling business environment with clear and transparent policies, a “flight to safety” here will serve as a mitigating factor supporting office space demand even if the global economy succumbs to recessionary pressures,” said Calvin Yeo, managing director, occupier strategy and solutions, Knight Frank.

Seizing opportunities from this shift in demand due to stringent pandemic restrictions in other parts of Asia will support office space demand, even if the global economy succumbs to recessionary pressures, Yeo added.

Even the emergence of hybrid working has failed to dent demand for supply, with some firms reportedly considering options such as restacking and reconfiguration to rejuvenate their office space for flexible working collaboration.

Over the next 12 months, global inflation, supply chain and material disruptions, and rising interest rates are expected to push global economies towards a slowdown. Still, Singapore should be able to weather it, according to Knight Frank.

“Despite the looming headwinds in the next six to 12 months, Singapore as a bastion of stability stands poised to be a shelter, notwithstanding the coming economic challenges, and barring mass redundancies by technology companies,” the report said.

Similarly, office rents in the city are expected to withstand economic headwinds and remain on the road to recovery.

“With the limited upcoming supply of CBD Grade A offices, office leasing activity is expected to remain firm throughout 2022, especially as up to 100% of employees are now allowed to return to the workplace,” Knight Frank said, adding that full-year rental growth should come between 3% to 5%.