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Broad rental recovery on the cards for Singapore Office Market following a quality-led improvement in Q3 2021

Siew Wong • 07/10/2021

- CBD Grade A rents continued to recover by rising 0.5% qoq in Q3 2021, marking a second consecutive quarter of growth
- Net absorption of CBD Grade A space also remained positive for a second straight quarter
- Flight to quality and tenant displacement demand fueled space take-up in Q3 2021
- CBD Grade B rental growth turned positive in Q3 2021, after four quarters of decline


Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm, has today published its latest Market Beat research report, which highlights the performance of the Singapore office property market in Q3 2021, the key drivers of demand, and the outlook ahead.

Office Demand

Data analysed by Cushman & Wakefield Research showed that the net absorption of CBD Grade A office space in Singapore remained positive for a second consecutive quarter, reaching 215,000 sf in Q3 2021. As of Q3 2021 year-to-date, CBD Grade A net absorption reached 283,000 sf, as compared to 183,000 sf over the same period in 2020.

Wong Xian Yang (黄显洋), Head of Research, Singapore at Cushman & Wakefield, said, “The recovery in net absorption was driven by flight to quality and tenant displacement demand from office towers planned for redevelopment. Examples include Red Hat and FTI Consulting which are relocating from AXA Tower to CapitaSpring and One Raffles Quay South Tower respectively. Moreover, technology and finance occupiers have continued to expand their headcounts, driving up demand for Grade A office spaces.”

However, the net supply of available space remains elevated, contributing to higher vacancies in Q3 2021. The vacancy rate climbed to 5.8% in Q3 2021 – up from 4.6% in the previous quarter.

“The vacancy rate is expected to narrow going forward. A substantial amount of Grade A vacant spaces are currently under negotiation and are likely to be snapped up over the next few months. The positive economic outlook for Singapore and the recovering global economy, coupled with accelerated vaccinations - which will allow further reopening of key advanced economies - will be supportive of Singapore’s open economy and help to prop up business sentiment”, Mr. Wong added.

Office Rents

Meanwhile, CBD Grade A office rents grew for the second consecutive quarter, rising by 0.5% qoq in Q3 2021. The rental growth was led by Marina Bay, Raffles Place, and Shenton Way /Tanjong Pagar which posted CBD Grade A qoq rental growth of 1.6%, 0.3% and 0.1% respectively in Q3 2021.

Additionally, CBD Grade B rental growth turned positive in the same quarter, growing by 0.1% qoq after four consecutive quarters of decline. Market recoveries have been historically characterised with a recovery in CBD Grade A office rents followed by CBD Grade B office rents. As such, Cushman & Wakefield Research believes the market has turned in a quality-led recovery.

There are a few tailwinds supporting the office market including a strong economic growth, continued occupier demand for quality offices, displacement demand, limited new Grade A office supply, and the tightening of overall office supply in CBD due to planned redevelopments (such as AXA Tower and Fuji Xerox building).

Mark Lampard, Executive Director and Head of Singapore Commercial Leasing at Cushman & Wakefield, said, “In recent quarters, we have seen a continued uptick in office leasing interest, including renewals and relocations among occupiers. Some occupiers are taking the opportunity to move into spaces that have become available in buildings with better specs or in a better location, while others are looking to renew their lease amid the anticipated recovery in the office market. We are generally optimistic about the office market outlook as Singapore remains a very attractive business destination, particularly among financial services and tech firms, Chinese companies, family offices as well as growth sectors such as healthcare and life sciences. These sectors will remain the key drivers of office space demand for the rest of the year, going into 2022.”

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