OUE Commercial REIT - Annual Report 2021

INDEPENDENT MARKET REVIEW SINGAPORE Potential Supply Island-wide, new office supply totalling 5.4 million sq ft is expected to come on stream between 2022 and 2026, of which an estimated 72% is located in the CBD. In 2022, two projects are expected to complete in the CBD. They are Guoco Midtown (0.6 million sq ft) and the redeveloped Hub Synergy Point (0.1 million sq ft). New supply in the CBD will rise to almost 1.3 million sq ft in 2023 due to the expected completion of IOI Central Boulevard Towers. Thereafter, new CBD office supply will moderate to around 1.0 million sq ft in 2024 with the projected completions of the redeveloped Keppel Towers (0.6 million sq ft) and Shaw Tower (0.4 million sq ft). No new project completions are expected in 2025 but new CBD office supply is expected to rebound in 2026 with the completions of the redeveloped Fuji Xerox Towers (0.2 million sq ft) and AXA Tower (0.7 million sq ft). 03 Rents Overall CBD Grade A office rents posted a better-than-expected full year growth of 4.2% in 2021. This is a turnaround from the 9.2% contraction in 2020. Rental growth in 2021 was supported by strengthening leasing activity in the office market and was largely led by the better-quality and newer office assets, in line with leasing demand. At the same time, delays in project completions due to COVID-19 related disruptions, coupled with stock withdrawals for redevelopment kept supply tight. Within the CBD, rent recovery was led by the Shenton Way/ Tanjong Pagar sub-market, which soared 7.3% YoY to S$9.29 per sq ft (“psf”) per month by end-2021, largely on the back of the ongoing rejuvenation of the sub-market. Meanwhile, the average gross rent of Grade A office space in the Marina Bay and Raffles Place sub-markets rose 2.9% YoY and 2.3% YoY to S$11.77 psf per month and S$9.77 psf per month, respectively. 04 CBD Office Market Outlook Underpinned by the sustained global economic recovery as well as Singapore’s increasingly competitive offerings as a global office hub, more corporates are expected to set up operations or strengthen their presence in the city-state. Technology and fintech companies, as well as investment management firms and family offices looking to expand or set up new bases in Singapore are expected to remain amongst the key demand drivers in 2022. Aside from these, anecdotal evidence points to an increase in enquiries by companies looking to expand their real estate footprint in Singapore to accommodate the re-allocation of some headcounts from Hong Kong to Singapore as they position themselves for growth in Southeast Asia. These include investment banks, fund managers and some firms in the consumer goods sector. Barring adverse external shocks, office demand could outpace supply in 2022 and fuel rental growth that is at least twice as fast as that recorded for 2021. 03 Potential Island-wide Office Supply 2026 2024 2025 2022 2023 CBD Orchard Road CBD Fringe Decentralised Areas (million sq ft) 2.5 2.0 1.5 1.0 0.5 0.0 Source: JLL Research, 4Q 2021 54 O U E COMM E R C I A L R E I T