Singapore Grade A office vacancy rates to go below 4% end-2022

2021 demand was eight times higher than 2020 totals.

Recent data from Cushman & Wakefield reveals that Singapore’s CBD Grade A office net demand reached 0.8 million square feet (msf) in 2021, more than eight times 2020’s net demand of 0.1 msf. CBD Grade A office vacancy rates reduced significantly to 4.9% in Q4 2021 from a peak of 5.8% in the last quarter. 

“As demand continues to pick up pace, CBD Grade A vacancy rates are expected to tighten further and go below 4% by the end of 2022. The recovery in occupier demand is also reflected in a fall of CBD Grade A office shadow spaces, dropping to about 0.2 msf in Q4 2021, from the peak of 0.4 msf in Q1 2021,” the analyst said.

Here’s more from Cushman & Wakefield:

Recovery momentum in the office market continues to accelerate with CBD Grade A office rents rising by 1.7% qoq in Q4 2021, as compared to 0.5% quarterly growth in the two preceding quarters. On a yoy basis, CBD Grade A rents have increased by 2.3% to $9.81 psf/mo for the whole of 2021, with the Marina Bay submarket leading growth at 4.9% yoy. 

The outperformance of the Marina Bay submarket can be attributed to its high concentration of prime office buildings which are in demand given the current flight to quality trend. For example, the global professional services firm, KPMG, is reportedly taking up 100,000 sf at Asia Square Tower 2, a Grade A office building. 

A flight to quality and thriving technology and financial sectors continue to fuel office demand. Technology and finance occupiers continue to be the dominant drivers of demand and drove about 72% of new leases within the CBD in 2021, according to C&W’s database. 

Given Singapore’s attractiveness as a tech and financial hub and strong growth prospects of Asia’s digital economy, these sectors are expected to continue their expansion spree as they increase headcount. Office demand could also pick up from other sectors which have been battered by the pandemic, as business conditions improve in 2022 amidst a sustained economic recovery and continued increase of business activities. 

Overall, resurgent office demand and tight supply are expected to propel CBD Grade A office rents by 4.6% in 2022, alongside an expected tightening vacancy rates.