Rental rates bottomed out in Q1 of 2021
During the course of 2021 rates bottomed out in Q1 last year, and then Grade A office rents grew by around 4.25%. Average gross effective rates for top Grade A buildings are around $10.23 per sq ft compared with $9.81 per sq ft the year before. The ultra-high-end properties are still commanding effective rates in excess of $11.00 per sq ft per month.
The amount of co-working space is expected to grow in 2022, with the opening of 21 Collyer Quay (fka HSBC Building). This category of space has already reached the 1.7 Million sq ft mark, which is around 5.5% of total CBD stock. This sector is predicted to advance further with the popularity of hybrid office space solutions.
Fewer companies are downsizing or closing down and more companies are expected to set up shop here, with Singapore’s attractiveness as a ‘smart city’ encouraging more companies in the high tech and finance sectors.
As a result of the continued expected increase in demand and further reduction in supply, we foresee that the vacancy rate in the prime Grade A sector could slip below 4.6% and the ‘leasing power’ is definitely shifting back towards the landlords. We expect that rental rates could rise by around 5.00%, in 2022 assuming there are no more Covid-19 setbacks or any other negative external factors.
The vacancy rate in the prime Grade A sector could slip below 4.6%.