Despite macroeconomic uncertainty dampening demand for office space in Singapore’s Central Business District, Grade A office rents showed a modest growth of 1.0% in the first quarter of 2023. According to JLL Singapore’s research, the gross effective rent for CBD Grade A office spaces rose on a quarterly basis to an average of $11.30 psf pm.
This is the second consecutive quarter of slowing growth following five quarters of consecutive growth, which Andrew Tangye, JLL Singapore’s head of office leasing and advisory, attributes to companies pausing their expansion and relocation plans.
Tay Huey Ying, JLL Singapore’s head of research and consultancy, notes that despite the current caution in sentiment, the scarcity of Grade A office space has prompted some companies to upgrade offices to better quality spaces in recent or soon-to-be-completed projects. This includes Munich Re and Corney & Barrow, who respectively took up two floors in 18 Cross Street and relocated to Hub Synergy Point, amongst others.
Several new office buildings are due for completion in the next two years in the CBD and beyond, including the Guoco Midtown in the Bugis-Beach Road area, IOI Central Boulevard Towers in Marina Bay, and Labrador Tower along Pasir Panjang Road, which are already partially pre-committed or negotiated. Financial, technology, media and professional services companies are amongst some of the occupiers that have already taken up or are in talks to lease these new spaces.
Despite this steady leasing activity, Tay believes that due to the present macroeconomic environment, backfilling of vacated spaces could take a bit longer and keep rental growth modest, or nonexistent, for the rest of the year. She added that the current lull in rent growth presents an opportunity for large space users to look into new office spaces in good quality buildings as the window is prime.
Tangye echoes her view, and expects that rent growth will pick up again post-2024 as the supply of Grade A office space dips and economic prospects gradually improve.
