Tight supply will significantly boost rents of Grade A office buildings in the Central Business District (CBD) over the next couple of years, according to a new report.
It forecast that prime rents could rise by 8 per cent this year and a further 5 per cent next year.
The report also estimated that new supply from this year to 2021 will average 614,000 sq ft a year. This is about 2 per cent of the existing stock and well down on the 5 per cent average over the past five years, so vacancies will stay tight over this period, said Colliers International, which compiled the report.
It added that rents in Shenton Way/Tanjong Pagar could grow at the fastest rate, driven by redevelopment and rejuvenation in the area.
Colliers noted that recently completed buildings such as Frasers Tower, Guoco Tower and UIC Building have raised the area's image - and its rents.
The Afro-Asia Building and the CPF Building (to be named ASB Tower) should also boost rents when they are completed.
The withdrawal of existing stock for redevelopment as landlords take advantage of the Urban Redevelopment Authority incentive scheme should lift rents as well.
AS A PROPORTION OF TOTAL CBD OFFICE SPACE
TECHNOLOGY, MEDIA AND TELECOMS
FLEXIBLE WORKSPACE COMPANIES
Colliers noted the growth of the technology, media and telecoms as well as flexible workspace sectors, which it said accounted for most of the net absorption of office space last year and so far this year.
Flexible workspace stock has more than trebled since 2015, it added.
Colliers said the Raffles Place/New Downtown area has the largest concentration of prime buildings and still ranks as the top choice for financial services firms, while urban renewal could spur rents in the City Hall as well as Beach Road/Bugis areas beyond 2022.
The financial services sector occupies 42 per cent of total CBD office space, well ahead of professional services on 15 per cent and technology, media and telecoms on 12 per cent. Flexible workspace companies are well back on 4 per cent.
Ms Tricia Song, head of research for Singapore at Colliers, said: "CBD office demand has historically been driven by financial services, professional services, energy and shipping.
"However, technology firms and flexible workspace operators have taken up a substantial amount of space in recent years."
Mr Rick Thomas, head of occupier services for Singapore at Colliers, said: "Occupier demands have evolved from the sole (ones) of location, price/rent and basic amenities (to)... flexibility, space efficiency, wellness and lifestyle amenities, and tenant experience."