Singapore Office Market Increasingly In Landlords’ Favour

SINGAPORE – After URA data showed that Singapore office rents increased by 2.1 percent quarter-on-quarter in Q3, while the office vacancy rate tightened further, real estate experts said they believe the office market will continue to be in landlords’ favour next year, reported The Edge on late Friday afternoon (28 October, SGT).

“The increase in rental coupled with an improvement in office occupancy level characterises an increasingly landlord’s market since the middle of 2022,” said Knight Frank Singapore’s Research Head Leonard Tay.

“This dynamic will continue into 2023 as occupiers are still on the lookout for quality office space in Singapore’s central business district (CBD), where supply remains tight.

Tay noted that in spite of economic headwinds on the horizon, key industries like real estate, banking, finance, and insurance are still upbeat and may continue expanding their employee numbers.

“With occupancies steadily tightening and leasing activity to remain firm for the rest of 2022, growth in rents for the whole of the year and into 2023 is expected to continue,” he forecasted.

“On the supply front, the availability of good quality office stock in the Core CBD remains tight. This is due to a lack of new supply coming onto the market, as IOI Central Boulevard Towers will only be completed in 2H 2023,” commented Colliers’ Research Head for Singapore Catherine He.

Consequently, she thinks some owners of commercial properties could be emboldened to raise asking office rents over the coming quarters.

Apart from the limited amount of upcoming office space, He noted that some office landlords are passing on increasing operational costs to their occupants in the form of higher service charges, leading to heftier gross effective rents. In fact, data from Colliers showed that service charges in some office towers here have risen by 10 percent to 30 percent in the past few months.

“Overall, office rents are expected to continue its positive momentum as the rental recovery is entrenched, although the pace of recovery will moderate next year due to economic headwinds, rising business caution and greater office supply coming onstream,” said Edmund Tie’s Research Head Lam Chern Woon.

The real estate consultancy expects CBD office rents to rise by 3 percent to 7 percent for the whole of 2022 before easing to 2 percent to 5 percent in 2023. Meanwhile, Colliers expects office rents will rise by 6 percent to 7 percent this year.