Business & Economy Property Singapore office market recovery finds firmer footing

Singapore office market recovery finds firmer footing




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Colliers International a prominent commercial real estate services company said more upside ahead as Singapore office market recovery finds firmer footing in the second quarter of 2018. Colliers said this in referring to its latest quarterly office market report Steady Gains on Firm Fundamentals which tracked the rental, leasing and investment activity within the office property sector in Singapore in Q2 2018.

Colliers’ research on Singapore office market found that CBD rents increased for the fourth consecutive quarter in Q2 2018, albeit at a more moderate pace.

CBD Premium and Grade A average gross effective rents rose by 2.6% in Q2 from the previous quarter to SGD8.82 – a touch slower than the 4.8% quarter-on-quarter (QOQ) growth in Q1 2018.

Mr. Duncan White, Head of Office Services at Colliers International, said, “We view the slower pace of rent increase as a momentary consolidation following the leasing market’s rapid recovery which saw an 11% year-on-year (YOY) growth from Q2 2017. Colliers is forecasting CBD rents to rise by an estimated 10-12% YOY in 2018, given the tighter vacancy in the CBD Premium and Grade A office segment, and firm interest for such spaces among financial, professional services, technology and flexible workspace firms.”

In the Singapore office market the projected growth in office rents will likely be front-loaded, with a sharper increase being recorded in 2018, and tapering down to a 5-7% YOY rise over 2019.

Given that office rents have climbed by some 7.5% year-to-date, Colliers expects steady rental upticks in the Singapore office market to continue over the rest of 2018.

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Prime office rents Q2 2018

Average Gross Effective Rents*

(SGD psf pm)



Raffles Place/New Downtown 10.66 1.6% 16.1%
Grade A
Raffles Place/New Downtown 9.18 3.1% 11.4%
Shenton Way/Tanjong Pagar 8.92 5.8% 15.4%
City Hall 8.93 0.4% 6.6%
Beach Road 7.78 2.4% 11.1%
Orchard Road 8.64 2.5% 8.5%
CBD Premium and Grade A 8.82 2.6% 11.0%
City Fringe 7.28 3.9% 9.1%
Suburban 4.77 1.7% 7.2%

Singapore office market
Image credit: Pixabay

All office micro-markets, including Grade B buildings, in the CBD experienced rental growth in Q2 2018, with Raffles Place/New Downtown (+16.1%) and Shenton Way/Tanjong Pagar (+15.4%) posting the two largest YOY increase during the quarter. This was likely driven by the newly completed Marina One in the New Downtown and Frasers Tower in Tanjong Pagar, which has consistently transacted in excess of SGD10.00 on effective rents, according to Colliers’ research.

In particular, Frasers Tower’s robust pre-leasing activity – anchored by multinational corporations such as Microsoft, Total Oil, Arup, Sumitomo Corporation – and following on from Guoco Tower’s strong performance since its completion in 2016, has fueled the rejuvenation of the Tanjong Pagar district. The completion of refurbishment works for office properties OUE Downtown, Robinson 77 and AXA Tower has also helped to catalysed a major market re-rating for the Shenton Way/Tanjong Pagar micro-market.

Meanwhile, the stream of anchor tenants filling up Paya Lebar Quarter’s office towers bodes well for cost-effective City Fringe districts. Further pre-commitments by various MNCs brought the pre-leased rate at PLQ to 50% across its three office towers ahead of its scheduled opening by the end of September 2018. These pre-leasing deals were with Spaces (IWG), Great Eastern, NTUC Income and SMRT Corporation.

Ms. JM Tan (陈洁梅), Senior Analyst of Research at Colliers International, said, “The strong rental upturn over 2018-2019 should accentuate the attractiveness of decentralised micro-markets, and prompt occupiers to consider City Fringe Grade A developments that can bridge the gap between cost and value. In Q2 2018, prime office rents in the city fringe rose 9.1% YOY to SGD7.28 and were up by 3.9% against Q1.”

 Notable office transactions in Q2 2018

Name of Property Transacted Price (SGD million) Price psf NLA (SGD) Micro-market
Twenty Anson 516.0 2,503 Shenton Way/Tanjong Pagar
MYP Plaza 247.0 3,000 Shenton Way/Tanjong Pagar
Springleaf Tower (strata) 54.2 2,602 Shenton Way/Tanjong Pagar
Samsung Hub (strata, whole floor) 46.6 3,550 Raffles Place/ New Downtown

The investment sale market performed well amid heightened investor interest in the office sector. Colliers found that total office sales transactions (on a rolling 12 months basis) increased by 8.7% QOQ to SGD3.79 billion in Q2, boosted by transactions including the sale of Twenty Anson for SGD516 million and MYP Plaza for SGD247 million.

Meanwhile, Urban Redevelopment Authority REALIS data as of 27 July 2018 showed that there were 108 strata deals closed during Q2 2018, which marked another triple-digit sales quarter following the 126 deals done in Q4 2017. This re-affirmed the rising interest in the strata office market.

In Q2 2018, the average imputed capital values of CBD Premium and Grade A office properties rose by 3.0% QOQ to SGD2,350 psf on the back of a strong leasing market. CBD Premium and Grade A office yields remained largely stable, ranging from 3.3% to 3.9% on average during the quarter.

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