Grade A office rents in the CBD of Singapore grew in 1Q2023 and q-o-q growth slowed for the second consecutive quarter according to JLL, a real estate consultancy. The growth of 1.0% q-o-q in gross effective rents to an average of $11.30 psf per month (psf pm) was lower than the 1.2% recorded in the previous quarter, which marked the first slowdown after five consecutive quarters of growth.
Andrew Tangye, Head of Office Leasing and Advisory at JLL Singapore, believes that the easing of rental growth is due to macroeconomic uncertainties which have dampened demand for office space. Large space users are reportedly “pressing the pause button” on expansionary and relocation plans.
Despite the current “cautious mood”, the tight supply of Grade A office space has seen some occupiers seizing the opportunity to upgrade to better office spaces at new and upcoming completions. An example of this is Corney & Barrow who relocated to Hub Synergy Point and German insurer Munich Re who took up two floors at 18 Cross Street for its new office.
New office space in the CBD includes Guoco Midtown in the Bugis-Beach Road area which received its Temporary Occupation Permit in January. About 80% of its space is reportedly committed and at least 10% is in advanced negotiations. At IOI Central Boulevard Towers, 45% of its space is currently pre-committed or under advanced negotiation and it is due to be completed in 3Q2023.
Labrador Tower along Pasir Panjang Road is estimated to be 25% pre-committed one year ahead of its completion in 2024. Notable tenants include Prudential which reportedly took up around 150,000 sq ft of space in a Green Mark Platinum Super Low Energy development.
Given the macroeconomic environment, JLL Singapore’s Head of Research and Consultancy Tay Huey Ying believes that office demand will remain more subdued. She anticipates backfilling of spaces vacated by relocating occupiers could take a little longer and this will keep rent growth modest, if at all, for the rest of the year.
Andrew Tangye predicts that rental growth will accelerate again post-2024 as new completions dip and demand returns as economic prospects improve. He suggests occupiers, especially large space users, to lock in spaces in good quality new office buildings during this time.