Singapore office rents see subdued growth in 1Q23: JLL

SINGAPORE, 28 March 2023 - Singapore’s CBD Grade A office rents stayed on the uptrend in 1Q23 although q-o-q growth slowed for the second consecutive quarter, according to JLL.

The real estate consultancy’s research showed that the gross effective rent for CBD Grade A office space rose 1.0% q-o-q to average at SGD 11.30 per sq ft per month in 1Q23, from SGD 11.19 per sq ft in 4Q22. This is a shade slower than the 1.2% q-o-q increase recorded in 4Q22 – the first slowdown following five straight quarters of rent growth acceleration.

Monthly Gross Effective Rents for Grade A CBD Office Space

Source: JLL Research

Mr Andrew Tangye, Head of Office Leasing and Advisory for JLL Singapore explained, “Demand for office space has been weighed down by macroeconomic uncertainties. Occupiers, especially the large space users, have generally pressed the pause button for expansionary and relocation plans. As such, leasing activity in 1Q23 was driven mainly by small-to-medium-sized space occupiers with immediate requirements such as new market entrants and those looking to accommodate new workplace design or increased hirings that took place in 2022.”

They include German insurer Munich Re who took up two floors at 18 Cross Street for its new office. Fine wine merchant Corney & Barrow also recently relocated to a new office at Hub Synergy Point.

Ms Tay Huey Ying, Head of Research and Consultancy for JLL Singapore adds, “Notwithstanding the cautious mood, the tight supply of Grade A office space saw occupiers who are confident of riding out the current economic turbulence seizing the opportunities presented by several new and upcoming completions to upgrade to quality office space, both in and outside the CBD.”

Within the CBD, we understand that Guoco Midtown which received its Temporary Occupation Permit in January 2023 has secured tenants for about 80% of its space. At least another 10% of the space is in advanced negotiations. Over at IOI Central Boulevard Towers that is due to complete in 3Q23, we estimate close to 45% of the space is already pre-committed/under advanced negotiation.

Occupiers who have recently committed to spaces or are in active negotiation in Guoco Midtown and IOI Central Boulevard Towers include companies from the financial services, technology, media and professional services industries.

Outside the CBD, Labrador Tower is estimated to be 25% pre-committed one year ahead of its completion in 2024. Prudential was reported to have taken up about 150,000 sq ft of space in the certified Green Mark Platinum Super Low Energy development along Pasir Panjang Road. The insurer is currently located at 51 Scotts Road that sits on land with 15-year tenure expiring in November 2022 but for which the landlord has secured a two-year extension to November 2024.

Ms Tay continues, “The macroeconomic environment continues to be saddled with uncertainties and put a damper on business confidence and office demand. While we expect leasing activity for recently or soon-to-be completed projects such as Guoco Midtown and IOI Central Boulevard Towers to maintain good traction on the back of the limited availability of new and quality office space in the CBD, backfilling of spaces vacated by relocating occupiers could take a little longer given the subdued sentiment. This will likely keep rent growth modest, if at all, in the rest of 2023.”

Mr Tangye concludes, “With rent growth currently taking a pause, and a few projects completing in and outside of CBD within these two years, there is no better window than now for occupiers, especially large space users, to lock in spaces in good quality new office buildings. This is especially considering that new completions will dip sharply post 2024 and coupled with the expectations of a return of demand following expected improvement of economic prospects, rent growth should accelerate again.”

Major new and upcoming office supply

Source: JLL Research