Why it is still challenging to find tenants in Singapore’s business parks

The vacancy rate in the East Planning Region business parks increased to 21.5% in 4Q21.

According to a Savills report, the vacancy level for business park space in the East Planning Region increased by 2.9 ppts QoQ in Q4/2021 to 21.5% largely due to reduced occupational pressures in ESR Bizpark @ Chai Chee and Changi Business Park. 

“Despite the completion of asset enhancement work for some buildings, it is nevertheless still challenging finding tenants. This was partly because some main target clients of business park space, such as technology and software firms which did well in the digital transformation age, moved to Grade B office spaces to acquire and retain talents,” Savills said.

Here’s more from Savills:

Vacancy level in the Central Region eased by 1.7% ppt QoQ to record low at 8.5% due to stock removal for redevelopment of 1 Science Park Drive, bringing the islandwide vacancy level down 0.2 of a ppt QoQ to 15.5% in Q4. The limited availability of space and constant demand in Mapletree Business City and one-north regions continued to support rental growth, driving Savills’ prime business park monthly rents up by 0.9% QoQ to S$5.86 per sq ft in Q4, 0.8% above that a year ago. 

Savills’ standard business park properties’ monthly rents remained in recovery mode, rising by 0.4% QoQ to S$4.01 per sq ft in Q4, the same rental level as a year ago. However, the rental growth could be attributed to the REIT-owned properties which held their rents up while offering other incentives such as Capital Expenditure (CapEx) allowance or rent-free period. 

While there was some spill-over of demand from high-spec industrial spaces to Grade B officers, some new high-spec industrial developments such as UBIX saw a healthy commitment rate. Coupled with the strong demand in some prime high-spec industrial developments, the average monthly rent for Savills’ high-spec industrial basket increased by 0.7% QoQ to S$3.56 per sq ft in Q4, albeit at a moderated pace compared with the 1.7% QoQ rate achieved in Q3.