Singapore Office Landlords Get Upper Hand as Rentals Jump

(Bloomberg) -- When it comes to renting an office in downtown Singapore, the tables have turned.

Landlords now have the upper hand in rental negotiations, with leasing rates in the city-state’s prime business districts rising at the steepest pace in more than four years. And with both demand accelerating and supply dwindling, rents are forecast to remain firm until at least 2022, when new supply is expected to come into the market.

An index published by the Urban Redevelopment Authority that tracks rents for Singapore’s central area rose by 3 percent in the three months ended Sept. 30 from the previous quarter, the biggest jump since the June quarter of 2014. Grade A office rents are expected to rise by 11 percent this year and 9 percent in 2019, according to Cushman & Wakefield Inc.

“Rising rents and shrinking leasing opportunities are driving a growing number of occupiers to explore the option of maintaining a small presence in the CBD while locating the rest of their operations outside,” said Tay Huey Ying, head of research and consultancy for Singapore at JLL. “Offices outside the CBD can look forward to enjoying spillover demand.”

According to JLL, average monthly rents for grade A offices in the CBD are already up more than 18 percent from their recent low of S$8.41 ($6.08) per square foot in the first quarter of 2017. Overall offiice rents in the business district have gained 12 percent since 2017, but are still 8.5 percent below the peak set in the first quarter of 2015.

Demand has continued to outpace supply for the fourth consecutive quarter, which has resulted in a fifth straight quarter of rental growth, URA data showed this month. The increase in occupied space of 45,000 square meters outpaced the expansion of total stock of 28,000 square meters, according to CBRE Group Inc.

“The banking sector saw some signs of improvement, with European and Asian banks active, while a number of insurance firms have also tied down new lease commitments,” Desmond Sim, head of research for Singapore at CBRE said.

To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, Peter Vercoe

©2018 Bloomberg L.P.