Singapore CBD Grade A office vacancy rates slip to 5.6% in Q4 2021 | Real Estate Asia

Singapore CBD Grade A office vacancy rates slip to 5.6% in Q4 2021

The high vacancy rates in Shenton Way was offset by the declines in other submarkets.

From the list of CBD Grade A offices tracked by Savills, net demand was positive for the second consecutive quarter, although it moderated to 206,000 sq ft in Q4/2021 compared to 472,000 sq ft in Q3/2021. 

The vacancy rate of CBD Grade A offices fell marginally from 5.8% in Q3 to 5.6%  in the final quarter of the year. YoY, there was a 1.4 ppt decline in the vacancy rate from the 7.0% registered in Q4/2020. 

Here’s more from Savills:

The significant rise in vacancy rate in Shenton Way was offset by the declines in the Raffles Place, Tanjong Pagar, Orchard Road and Beach Road/Middle Road sub-markets. The QoQ increase of 2.4 ppts in Shenton Way was attributed to the inclusion of the recently completed Afro-Asia building into the office stock.

In terms of office grading, there was an increase in vacancy rate of Grade A offices from 7.6% in Q3/2021 to 8.5% in Q4/2021, while decreases in vacancy rates of Grades AA and AAA offices were observed, indicating a flight to quality of offices. 

For the whole of 2021, the net take-up of Savills basket of CBD Grade A offices was 446,000 sq ft, doubling the 221,000 sq ft recorded in 2020. 

Rents

With muted leasing activities in the quarter, the average monthly rents of Savills basket of CBD Grade A offices largely remained unchanged for the second consecutive quarter at S$9.37 psf. On a yearly basis, CBD Grade A office rents fell 1.6% in 2021 as compared to the 5.6% decline in 2020. This also marks the second consecutive year of decline. 

The contraction in rents occurred mainly in 1H/2021 when demand for office space was relatively weak as companies await further instructions from the government regarding the work from home arrangements and the main sources of demand were mostly from technology and finance firms. 

In Q4/2021, while rents of Grade AAA offices continued to fall for an eighth consecutive quarter, it was offset by increases in rents of Grade A and AA offices. Across the various subzones, office rents in Marina Bay, which has a high proportion of Grade AAA offices, fell the most by 1.1% to S$12.06 psf in the quarter. Marginal rental decline was also observed in Raffles Place and City Hall. Nevertheless, landlords remained confident of the office leasing market and expect rents to increase in 2022

 

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