CapitaLand Integrated Commercial Trust - Annual Report 2021

CBD CORE OFFICE SUPPLY AND DEMAND Historical islandwide office average annual net absorption for the last five years (2017 – 2021) was 0.9 million sq ft. Islandwide net absorption was 0.3 million sq ft in 2021, contributed by an increase in leasing activity and continued take-up of newly completed stock such as in CapitaSpring, reversing the net absorption of -0.6 million sq ft in 2020. This was on the back of the strong last quarter of 2021 which recorded an absorption of 0.3 million sq ft. Despite the Omicron variant introducing some uncertainty, the government’s announcement that work from home would no longer be the default from 1 January 2022, allowing up to 50% of employees to return to the office, gave occupiers confidence. As such, 2021 concluded with positive market sentiment, and the positive momentum should continue into 2022. Overall, leasing activity seems to be dominated by renewals, with pockets of relocation and new set-ups. Islandwide office vacancy rate as at 4Q 2021 stood at 6.3%, a 0.3 percentage points increase from 6.0% y-o-y. Vacancy in the CBD Core rose to 6.7%, a 0.4 percentage points increase from 6.3% y-o-y in the same period, on the back of new completions. Rental Values Healthy demand compounded by tight supply resulted in an overall increase in office rents islandwide. Supported by demand for better quality office space and new completions, Grade A CBD Core rents made a faster recovery with three consecutive quarters of expansion since 2Q 2021, while Grade B CBD Core rents started to stabilise in 4Q 2021. In 4Q 2021, Grade A CBD Core rents increased for the third consecutive quarter by 1.4% q-o-q or 3.8%y-o-y to S$10.80 psf/month. While Grade B CBD Core rents rose by 0.6% q-o-q to S$7.80 psf/month. However, this is still 1.3% lower than that in 4Q 2020. CBD CORE MONTHLY RENTAL VALUES 12.0 11.0 10.0 9.0 8.0 7.0 6.0 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 Rental Values (S$ psf) Grade A CBD Core Grade B CBD Core $9.10 $7.30 $10.45 $8.00 $11.45 $8.70 $10.40 $7.90 $10.80 $7.80 Source: CBRE Singapore, 4Q 2021 Source: CBRE Singapore, 4Q 2021 1.5 1.2 0.9 0.6 0.3 0.0 -0.3 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021 10.0 8.0 6.0 4.0 2.0 0.0 -2.0 CBD Core (million sq ft) Vacancy Rate (%) Net Absorption CBD Core (sq ft) (LHS) Net New Supply CBD Core (sq ft) (LHS) Vacancy Rate CBD Core (%) (RHS) Vacancy Rate Grade A (%) (RHS) Vacancy Rate Grade B (%) (RHS) CapitaLand Integrated Commercial Trust 108 Independent Market Review