Singapore Leasing Market Update
As Q1 of 2019 comes to a close, here’s a snapshot of the most important commercial property trends in Singapore in the office, retail and industrial sectors*.
Rents for CBD offices increased strongly in 2018, especially in the A-Grade space which recorded the highest year of annual growth (13%) since 2010.
This strong increase was driven by low vacancy rates. A-Grade CBD rents are now $9.80 per square foot per month. The upward trajectory of office rentals is expected to continue for the next three years, with no major supply injections in the pipeline.
The strongest rates of growth in 2018 in Singapore occurred for A-Grade space on Beach Road (18.6%) and Shenton Way (18.4%).
The most expensive areas currently are Marina Bay and Raffles Place, which average $12 per square foot.
B-Grade premises in the CBD average $7.86/ft2 and just over $5.97/ft2 island-wide.
The key demand drivers in the Singapore office market include flexible coworking space operators, technology firms, and insurance companies.
Rents for prime retail space fell by 2% over 2018 and vacancy levels increased from 8% to 9%. However, the rental decline in 2018 was lower than the annual decreases recorded in 2017 (4.7%) and 2016 (8.3%). This trend suggests that retail rents may be close to bottoming out.
Average prime rents islandwide grew by 1.2% year on year, backed by strong occupancies in Orchard Road. This can most likely be attributed to the government-backed renewal program, designed to reinvigorate shopping in the Orchard Road area. Prime retail rents average $33.10/ft2 per month in Orchard Road and $28.60/ft2 per month for the Suburban malls as the latter enjoys close proximity to high catchment areas.
Leasing demand is currently being driven by food and beverage operators, as well as those attempting to capitalise on increased consumer demand for health and wellness products. For example, multi-brand ‘athleisure’ retailers like JD Sports and Footlockers have entered the market in recent years in response to this trend. Retail demand, in general, is forecast to rise marginally in the short-term due to increased tourism.
Approximately 1 million ft2 of new retail space is expected to be added to the market during 2018 and 2019, before the new supply tapers off significantly in 2020 and 2021.
Industrial and factory space
Rents for warehouse space stabilised in 2018, following two years of consecutive decline. This suggests the market may have bottomed out, with warehouse rents currently averaging $1.25/ft2.
Island-wide supply of warehouse space is expected to increase in 2019 on the back of a positive outlook for the Singaporean economy, before tapering off in 2020.
Factory rents fell by 9% in 2018 on the back of increased supply. They now average $1.70/ft2. Organisations in the semiconductor, petrochemical, and logistics industries dominate the Singapore factory market.
How we can help
Our team at Tenant CS has an office in Singapore and we closely monitor local market conditions. We can provide high-quality tenant representation services for our clients, including lease negotiation and renewals, as well as office relocation.
Contact us today to find out how we can help you!
*Note: figures based on Q4, 2018 reports.