SINGAPORE’S prime office rents outperformed most Asia-Pacific cities in Knight Frank’s Asia-Pacific Prime Office Rental Index, recording a quarterly increase of 1.7 per cent and a year-on-year increase of 5.5 per cent in the fourth quarter of 2022.

Rents in the city-state increased S$10.69 per square foot (psf) per month, while vacancy dipped slightly to 5 per cent from 5.2 per cent the preceding quarter. 

Overall, Knight Frank projected an increasing 12-month rental outlook for Singapore, with rents expected to continue rising amid declining vacancy.

Singapore was ranked third among the 23 cities in the index, behind Auckland and Bangkok. Auckland led the quarterly rental growth at 4.9 per cent, followed by Bangkok at 3.3 per cent.

In general, 16 out of 23 cities recorded stable or increased rents. Tokyo and Seoul saw a 0.2 per cent and 0.5 per cent quarterly growth respectively.

At the same time, Taipei registered 0.5 per cent quarterly growth, while Hong Kong’s quarterly office rental posted a decline of 4.8 per cent.

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Likewise, major cities in mainland China also saw decreases in quarterly prime office rental. Beijing and Shanghai recorded a 0.3 per cent and 0.5 per cent dip respectively, while Shenzhen and Guangzhou saw a 1 per cent and 2.5 per cent decrease.

Among Asean cities, Jakarta’s quarterly and annual rental numbers were the lowest-performing, posting a loss of 13.3 per cent and 6.5 per cent respectively. Its 12-month forecast is also expected to remain unchanged.

Ho Chi Minh City’s rents were flat on a quarter-on-quarter basis and shrank 0.2 per cent annually.

In terms of occupancy cost for Asia-Pacific prime offices in Q4, Singapore came in second at US$109.8 psf per year. Hong Kong led the pack at US$174.3 psf per year, while Tokyo came in third at US$92.8 psf per year.

Separately, quarterly vacancy rates grew 0.8 per cent for the second consecutive time, marking a 40 per cent increase since Q4 2018.

Phnom Penh was the top contributor to Q4 vacancy rates at 42.8 per cent, followed by Kuala Lumpur and Jakarta at 28 per cent and 26.9 per cent respectively. Singapore, on the other hand, ranked among the lowest in terms of vacancy rates for the quarter at 5 per cent followed by Tokyo (4.3 per cent), Taipei (4 per cent) and Seoul (1.1 per cent).

Nonetheless, the Asia-Pacific office market is projected to remain favourable to tenants in the next 12 months. Office inventory is also expected to rise 15 per cent by 2025, with 26.2 million square metres in Grade A new supply.

Christine Li, head of research at Knight Frank Asia-Pacific, said that although the fourth quarter of 2022 did not show an uptick in rents, full-year rental growth for prime Grade A office spaces remained positive at 0.8 per cent. 

“This marks a reversal of the negative growth seen during the pandemic years, demonstrating the sector’s resilience as it vigilantly navigates through a macroeconomic slowdown,” she said.

Li added that the Asia-Pacific region is expected to benefit from China’s reopening this year, thus stimulating growth in the Asia-Pacific office market.

Tim Armstrong, global head of occupier strategy and solutions at Knight Frank, said the current economic challenges, rental and occupancy levels continue to be supported by steady demand and limited supply despite the current economic challenges.

“We expect growth in office rents to moderate as occupiers continue to adopt more flexible strategies and be more prudent with their spending. The trend towards flight-to-quality buildings with sustainable features and varied amenities will continue to gain momentum as businesses work towards their environmental, social and governance (ESG) goals,” he added.