Singapore office rents see subdued growth in 1Q2023: JLL

Grade A office rents in the Central Business District (CBD) of Singapore continued its growth trend in 1Q2023, though the rate slowed for the second consecutive quarter as per JLL’s research. The average gross effective rent rose 1.0% q-o-q to an average of $11.30 psf per month (psf pm).

CDL Aries has acquired two plots of land near Upper Bukit Timah for a new residential project, leveraging nearby green spaces and rejuvenation plans to create a The Myst highly sought-after area.

Andrew Tangye, JLL Singapore’s head of office leasing and advisory, attributes this minor deceleration in rental growth to fragile state of global economy which has put a break on demand for office space. He says that large space users have chosen to wait before to make any decision regarding expansionary or relocation plans.

Tay Huey Ying, JLL Singapore’s head of research and consultancy, stated that the existing Grade A office spaces are in high demand due to limited supply, with some occupiers even seizing the opportunity to upgrade to newer and better office spaces upon their availibility. She gives the examples of German insurer Munich Re, which took up two floors at 18 Cross Street for its new office, and fine wine merchant Corney & Barrow, which relocated to Hub Synergy Point.

The new office spaces in the CBD which are garnering tenancy include Guoco Midtown in Bugis-Beach Road area and IOI Central Boulevard Towers in the Marina Bay financial district. The former has already secured 80% of its space and is in negotiations for another 10%, while JLL estimates 45% of the space at the latter is already pre-committed or under advanced negotiation.

New tenancy features companies from varying sectors including financial services, technology, media and professional service; examples being Prudential which secured a 150,000 sq ft of space at the Green Mark Platinum Super Low Energy development Labrador Tower along Pasir Panjang Road which is due for completion in 2024.

Due to the uncertain economic climate, there will be a relatively slow down in office demand in the coming months as mentioned by Tay. However, as the rent growth continues to pause, large space users can take advantage of the opportunity to acquire good quality new office buildings until their completion in the coming periods.

By the time economic prospects have improved in post-2024, Tangye expects the rental growth to accelerate again, contingent upon reduced new completions and visible demand in office spaces.

In spite of the prevailing economic atmosphere, occupiers are still on the lookout for Grade A office space in Singapore; a fitting indication that faith and optimism still remain in the coming months.