Singapore office rents see subdued growth in 1Q2023: JLL

Grade A office rents in the Central Business District of Singapore saw a rise in the first quarter of 2023, though the q-o-q growth slowed for the second consecutive quarter. Real estate consultancy JLL reported an average gross effective rent of $11.30 psf per month, a modest 1.0% increase from the previous quarter.

This marked a slowdown in the 5 consecutive quarters of growth seen prior to this. Andrew Tangye, head of office leasing and advisory at JLL Singapore, attributed this lowering of growth to macroeconomic uncertainties that dampened demand for office space. He noted that large space users are largely refraining from relocating or expanding right now.

Small-to-medium sized space occupiers were largely driving leasing activity in the first quarter of 2023, with new market entrants and those needing to accommodate new workplace design or hiring being the major contributors. Notable leases in the CBD during this time include German insurer Munich Re and fine wine merchant Corney & Barrow.

In the face of a cautious market, new office spaces have still seen solid take-up. This includes Guoco Midtown in the Bugis-Beach Road area and IOI Central Boulevard Towers in the Marina Bay financial district, both of which have secured tenants for 80-90% of their space. These buildings have seen companies from various sectors, including financial services, technology, media, and professional services, commit to spaces or enter into active negotiation.

Outside the CBD, Labrador Tower in Pasir Panjang is estimated to be 25% pre-committed one year ahead of its planned completion in 2024. Prudential is among the tenants that have already signed on, taking up 150,000 sq ft of space in the Green Mark Platinum Super Low Energy development.

Tay Huey Ying, head of research and consultancy at JLL Singapore, expected office demand to remain rather muted due to the macroeconomic realities and that occupiers could take longer to backfill spaces vacant due to relocations. As such, Office rent growth is anticipated to remain modest for the remainder of the year.

Post-2024, Tangye believes that the tight supply of Grade A office spaces coupled with an improvement in economic prospects will result in a rebound in demand and an acceleration in rental growth. In the meantime, he advises space users to seize the current window of opportunity to lock-in good quality office spaces in new buildings.

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