Grade A office rents in Singapore’s CBD increased in 1Q2023, though this represented a slowdown on the previous quarter, according to JLL research. Gross effective rent for these premium office spaces rose 1.0% q-o-q to an average of $11.30 psf pm, a slight decrease from the 1.2% growth that was seen in 4Q2022.
This slowdown has been attributed to macroeconomic uncertainties that are currently making large space occupiers take a more cautious approach to rental and expansion plans. As such, leasing activity in 1Q2023 was mainly driven by more immediate requirements from small-to-medium-sized space occupiers.
Notable tenants that have secured new office spaces in the CBD include German insurer Munich Re, who have taken two floors at 18 Cross Street, and fine wine merchant Corney & Barrow, who relocated to Hub Synergy Point.
Despite the current market atmosphere, tight supply of Grade A office space has been encouraging some tenants to take advantage of recent and upcoming completions, with Guoco Midtown in the Bugis-Beach Road area, around 80% pre-committed or under advanced negotiation, and IOI Central Boulevard Towers in the Marina Bay financial district 45% pre-committed or under active negotiation.
Occupiers seen in these areas come from a variety of sectors, such as financial services, technology, media, and professional services.
Outside the CBD, Labrador Tower on Pasir Panjang Road has been estimated as 25% pre-committed, one year ahead of its completion in 2024. Prudential, who have signed a 15-year lease expiring in November, albeit with a two-year extension, reportedly took up around 150,000 sq ft of the Green Mark Platinum Super Low Energy building.
Given the still uncertain macroeconomic conditions, JLL’s Head of Research and Consultancy Tay Huey Ying anticipates backfilling of spaces vacated by relocating occupiers to take a little longer and is likely to keep rent growth relatively modest for the rest of the year.
However, JLL Singapore’s Head of Office Leasing and Advisory, Andrew Tangye believes office demand will pick up again post-2024. With rent growth currently taking a pause and several projects coming online before then, he suggests large space users take the opportunity now to secure good Quality new office buildings.