CBD Grade A Office Rents Up By Nearly 8% In Q1 2023
SINGAPORE – The latest data from Jones Lang LaSalle (JLL) showed that gross effective rents of Grade A office space in the city-state’s central business district (CBD) increased by about 7.93 percent from S$10.47 psf per month in Q1 2022 to S$11.30 psf per month during the first quarter of the year, according to a recent report from The Edge.
However, the quarter-on-quarter office rental growth has eased for the 2nd straight quarter. In Q1 2023, gross effective rents of Grade A office space in Singapore’s CBD edged up by 1.0 percent compared to the previous three-month period, down from the 1.2 percent quarterly uptick witnessed in Q4 2022, which marked the 1st slowdown after five consecutive quarters of office rental growth.
The slowdown in office rental growth is due to macroeconomic uncertainties that have negatively impacted demand for office space, said Andrew Tangye, Head of office leasing and advisory at JLL Singapore.
He shared that major office space tenants have “generally pressed the pause button” for expansionary and relocation plans. “As such, leasing activity in Q1 2023 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 hiring that took place in 2022.”
These small- to medium-sized occupants include fine wine seller Corney & Barrow, which transferred to Hub Synergy Point and German insurer Munich Re, which leased two levels at 18 Cross Street for its new office.
Despite the easing of office rental growth and the present “cautious mood”, JLL Singapore’s Research Head Tay Huey Ying disclosed that amidst the tight supply of Grade A office space in the city-state, some companies seized the opportunity to upgrade to better workspace at new and upcoming developments.
One of the new office spaces in Singapore’s CBD is Guoco Midtown’s office component, which has pre-leased 80 percent of its workspaces and at least another 10 percent is understood to be in advanced negotiations. At IOI Central Boulevard Towers, which is slated to be ready by the 3rd quarter of this year, 45 percent of the office space has already been pre-committed or under advanced negotiations.
Firms that have recently pre-leased office spaces or are in active negotiations at both commercial properties include those from the financial services, technology and media, and professional service industries.
Looking ahead, Tangye expects office rental growth in Singapore will accelerate again after 2024 due to a sharp fall in new completions and a return in demand as the economic situation improves.
“With rent growth currently taking a pause, and a few projects completed in and outside of the 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,” he added.