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Office rents in Singapore’s CBD to grow by 8% in 2019 and 5% in 2020



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Grade A office rents in Singapore’s central business district (CBD) are expected to grow by 8% in 2019 and 5% in 2020 given tight supply and high pre-commitments. This was according to a new report by global commercial real estate services organisation, Colliers International.

The report also expected supply in 2019-2021 to average 614,000 sq feet (57,000 sq metres) per annum or 2% of stock, versus 5% for last five years, keeping vacancies tight in 2019-2020.

Rents in Shenton Way/Tanjong Pagar could grow at the fastest rate on a 3- and 5-year horizon, driven by redevelopment and rejuvenation in the area, the media release stated, adding that new buildings such as Frasers Tower, Guoco Tower and UIC Building completed in 2016-2018 had raised the image and rents of the micro-market.

Additionally, new developments expected to raise rents further in 2020 when they are completed include the redevelopment of Afro-Asia Building and CPF Building (to be named ASB Tower). At the same time, rental growth could be further supported by withdrawal of existing stock for redevelopment as landlords adopt the URA incentive scheme.

The Top Micro-markets in Singapore report, which examines the occupier profiles also identified the most attractive office locations for the top six industry sectors in Singapore’s central business district (CBD).

In assessing the six micro-markets in Singapore’s CBD – Raffles Place/New Downtown (Premium), Raffles Place/New Downtown (Grade A), Shenton Way/Tanjong Pagar, Beach Road/Bugis, City Hall, and Orchard – Colliers Research considered factors such as existing industry clusters, availability of office stock, accessibility, and rents.

The research noted that given Singapore’s status as a global financial hub, it is perhaps unsurprising that the financial services sector occupies a lion’s share (42%) of total office space in the CBD.

Other relatively large space users are the professional services and technology, media and telecoms (TMT) sectors, followed by resources, energy and commodities, consumer, and flexible workspace companies.

The research found that existing clusters within each CBD micro-market signal favourable conditions relevant to each sector. For example:

  • Financial services gravitate towards new buildings with large floor plates and premium specifications, and are less sensitive to rents.
  • Raffles Place/New Downtown (Premium) is the top office location for financial services companies, given very strong existing cluster and availability of premium Grade A stock.
  • For professional services firms, Raffles Place/New Downtown (Grade A) also emerged as the top location, given the highest sector concentration and excellent accessibility.
  • Shenton Way/Tanjong Pagar, which has a relatively more well-balanced sector exposure, is ideal for TMT and flexible workspace operators for its modern new builds and high accessibility.
  • Resources, energy and commodities firms are best located in City Hall where cluster concentration is considerably higher relative to other micro-markets, while enjoying good accessibility.
  • Orchard remains the preferred office location for the consumer sector given the proximity to distribution channels.

Tricia Song, Head of Research for Singapore at Colliers International, said: “Singapore CBD office demand has historically been broad-based, driven by the core sectors of financial services, professional services, energy and shipping. However, we observed that technology firms and flexible workspace operators have taken up substantial amount of space in recent years – we estimate that they accounted for about 75% of net absorption in 2018, for instance. We expect such changing occupier trends as well as the ongoing rejuvenation and new developments within the city to continue to shape the various office micro-markets in the CBD.”

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