Outlook 2023 Singapore

SINGAPORE OFFICE

KEY MESSAGES BRISBANE SINGAPORE

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 Singapore’s CBD Grade A office market faces a relatively tight supply over the medium term.  New CBD Grade A office supply is expected to average 0.7 million sf per annum (2023-2027), this compares with a 10-year annual average of about 1.0 million sf. After bumper supply in 2023, supply tightens in 2024 and 2025.

 Amidst a flight to quality, 2023 is expected to see relatively healthy net absorption of about 0.9 million sf, similar to 2022 levels.  CBD Grade A vacancy is expected to tighten to 4.4% by end-2022 and expand again to 5.4% in 2023 due to slower demand and higher supply in 2023

 Despite global economic uncertainty, CBD Grade A office rents is expected to grow in 2023 as vacancy rates remain relatively tight.  Rents are forecast to grow by 6.1% yoy in 2022, before slowing to 3.1% yoy in 2023.  CBD Grade A office rents to reach SGD10.41 sqft/mo at the end of 2022, and to SGD10.73 sqft/mo at the end of 2023, surpassing pre pandemic levels.

 Though a weaker global economic outlook would weigh on the Singapore office market, an ongoing flight to quality, and Singapore's attractiveness as a regional headquarters in Asia Pacific and South-east Asia for companies will be supportive of the CBD Grade A office market.

SINGAPORE NEW SUPPLY

NEW SUPPLY (MSF)

1.4

 The CBD office market supply remains relatively tight.  Key upcoming new Grade A supply from Guoco Midtown (Q4 2022) and IOI Central Boulevard Towers (2023) have healthy pre commitment rates.  Current supply could tighten further due to potential redevelopments prompted by government programmes and the need to meet higher sustainability standards.

FORECAST

1.2

1.0

0.8

0.6

0.4

0.2

0.0

2020

2021

2022F

2023F

2024F

2025F

2026F

Source: Cushman & Wakefield

SINGAPORE DEMAND & VACANCY

NET ABSORPTION (MSF) AND VACANCY RATE (%)

FORECAST

1.2

6.0%

 The CBD Grade A office net absorption has recovered to near pre-pandemic levels.  CBD Grade A office net absorption is forecast to reach 900,000 sqft in 2022 led by healthy take-ups at newer developments.  CBD Grade A office net absorption to remain at positive levels in 2023 although vacancy rise could rise to 5.4% due to higher supply.  Post-2023, vacancy is expected to tighten as with limited supply in the pipeline

1.0

5.0%

0.8

4.0%

0.6

3.0%

0.4

2.0%

0.2

1.0%

0.0

0.0%

2020

2021

2022F 2023F 2024F 2025F 2026F 2027F

Net Absorption

Vacancy Rate

Source: Cushman & Wakefield

RENT (SGD/SQFT/MO) AND RENT GROWTH (% PER ANNUM) SINGAPORE RENT GROWTH

FORECAST

8.0%

14

 Amidst an uncertain economic outlook, CBD Grade A rents are expected to grow at about 3.1% y o-y in 2023, slowing from a 6.1% y o-y increase in 2022.  A slowdown in tech demand, a key driver of office space, and higher levels of shadow space in the market would limit rent growth  Over the longer term, a more gradual rental growth trajectory is expected given lower office structural demand due to hybrid work.

6.0%

12

4.0%

10

2.0%

0.0%

8

-2.0%

6

-4.0%

-6.0%

4

-8.0%

2

-10.0%

0

-12.0%

2020

2021

2022F 2023F 2024F 2025F 2026F SGD/SQFT/MO Rent growth (%)

Source: Cushman & Wakefield

CONTACTS

RESEARCH: Wong Xian Yang

CAPITAL MARKETS: Shaun Poh Executive Director​ shaun.poh@cushwake.com​

Head of Research, Singapore xianyang.wong@cushwake.com LEASING: Jeryl Teoh Senior Director, Commercial Leasing, Singapore jeryl.teoh@cushwake.com

LEASING: Deyang Leong Senior Director, Commercial Leasing, Singapore deyang.leong@cushwake.com

Asia Pacific Dr Dominic Brown Head of Insight & Analysis, Asia Pacific dominic.brown@cushwake.com

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