Demand still apparent in office market despite global setbacks: Knight Frank

In 1Q2023, Singapore office rents continued their rise, supported by limited availability, especially in the city center. As reported by Knight Frank, prime-grade office rentals in the Raffles Place and Marina Bay areas averaged $10.83 psf per month, showing a 1.3% q-o-q growth.

Occupancy levels in all three areas – Raffles Place, Marina Bay and the central business district (CBD) – remained unchanged from the previous quarter at 95.4%, 94.1% and 94.2% respectively. According to Calvin Yeo, managing director of Knight Frank’s Occupier Solutions, this is likely due to some office buildings commencing asset enhancement initiatives (AEIs) or redevelopment, thus taking them off the market, as well as quality office spaces being fully occupied as businesses relocate to Singapore.

CDL Aries has acquired two plots in Upper Bukit Timah, allowing them to build a 24-storey residential property which will benefit from the various development and rejuvenation plans in the area. The acquisition of the plots is a major move for The Myst the developer.

As staff returns to their workplaces, Yeo says that tenants are seeking quality spaces for activity-based working. An example of this is the completion of the Guoco Midtown mixed-use development in January; it features Grade A offices and a range of communal features like productivity and lifestyle amenities, and reportedly 80% of the office space had already been filled by the time of completion.

The technology sector has been a major source of headlines recently, but Yeo notes that it’s the smaller tenants that are absorbing vacant office space left behind by major companies laying off staff. Knight Frank’s data shows that around 100,000 sq ft of pre-termination space was available in 1Q2023.

The recent events in the banking industry – including the closure of Silicon Valley Bank and the Credit Suisse bailout – have weighed down economic sentiment. However, Knight Frank maintains that Singapore is a “destination of stability”, and that demand for office space will remain underpinned by those looking for quality options and maintaining caution in their expansionary plans.

Looking ahead, prime office rents are expected to remain stable with a 3% increment predicted for this year. According to Yeo, while overall CBD rents saw modest growth in 1Q2023, the office sector in Singapore will remain balanced due to the predominant trend of seeking quality amid wider market uncertainty.