Singapore firms are seeking rented office space real estate spaces in the fringes of the city, attracted to competitive office rent levels in the area compared to the CBD, a report by property management consultancy Colliers International said.

According to the Colliers report, the difference in office rent between the CBD and the city fringe in Singapore has expanded to 22 percent in 2019 from only 8 percent in 2011. The rent for a grade A office in the CBD is now $10.08 per square foot per month according to Colliers data. At the same time, the same extent of office space will cost only $7.9 per month to rent in the Singapore city fringes, which attracts renters seeking more affordability and value.

Colliers identifies Paya Lebar, HarbourFront, and Alexandra on the Singapore city fringes as locations on the fringes that have reshaped Singapore’s office space rental market outside the CBD. The draw for renters in Alexandra is the 2016-completed Mapletree Business City. Along with the other developments in the area, PSA Building, Alexandra Technopark, and Alexandra Point the area has around 5 million square feet of business space including grade A office real estate.

The precints of Paya Lebar and HarbourFront individually offer more than 1.6 million square feet of net lettable office space area, according to Colliers. The Colliers report says that in terms of investment prospects, rental growth, and capital appreciation, the city fringe offers better opportunities. The areas in these precints that are specifically zoned in for the government’s urban regeneration plans offer higher investment value.

According to the report, grade A offices in the city fringe offer a cap rate of 3.7 percent to 4 percent as of the third quarter of 2019. At the same time, CBD grade A offices offer 3.15 to 3.50 percent. Grade A office rents in Singapore’s city fringes have climbed 18.4 percent year to date as of the third quarter of 2019 to $7.9 per square feet per month. Colliers predicts a stable rent growth of 2.4 percent CAGR from 2019 to 2023 in Singapore’s city fringes as supply remains tight.