Singapore CBD rents to hit S$9.54 psf per month by end-2020: report

CUSHMAN & Wakefield is projecting rents in Singapore's central business district (CBD) to land at S$9.54 per square foot (psf) per month by the end of 2020, down 10 per cent from 2019's peak of S$10.66 psf per month.

The real estate services firm expects rents to continue their decline in 2021, it said in a report on Thursday. The fall comes as companies start negotiating for shorter leases, convinced that increased flexibility from a prolonged period of work from home will translate to a reduction in real estate footprint needs, the report said.

On the other hand, rents in the city fringe and suburban offices are showing less of a decline compared to the CBD. Rents in these segments fell only by 1.5 per cent and 1.6 per cent respectively across all grades in the year to date period between Q1 and Q3 2020, compared to CBD Grade A office rents which dropped by 7.7 per cent.

Falling CBD rents may lead to some degree of flight to quality, particularly for firms that are recording growth, Cushman & Wakefield said. However, by and large, companies will resist capital expenditure, it added.

Mark Lampard, Cushman & Wakefield's executive director and head of commercial leasing in Singapore, said conversely, companies based in the fringe or suburban markets have less room to impact their bottom line as rentals in these markets are lower.

He added that co-working will therefore remain very relevant as it provides much-needed flexibility for tenants in this climate of uncertainty.

Furthermore, demand for the city fringe and suburban markets is expected to remain healthy as the pandemic has forced many firms to consider secondary office locations as part of business continuity planning.

Cushman & Wakefield head of research for Singapore and South-east Asia Christine Li said: "Planning contingencies for secure secondary office locations has become a priority for many corporates and this trend will feed demand for city fringe and suburban locations, including business parks."

The report noted that the development of the Central Boulevard site in 2021 will inject 1.3 million square feet of new supply in the CBD market and may put further pressure on rents.

However, the prospects for demand "remain bright" as Singapore continues to attract a sizeable pool of bluechip corporates, particularly among pharma, biomedical, technology and its related suite of service providers, Cushman & Wakefield said.