Singapore Office Rents Slid 0.3% In Q3 2023
SINGAPORE – Preliminary data from Jones Lang LaSalle (JLL) showed that monthly office rents in the city-state dipped by 0.3 percent quarter-on-quarter to an average rate of S$11.29 psf in Q3 2023 from S$11.32 psf during the prior quarter, reported The Edge on Monday evening (25 September, SGT).
The property consultancy stated that the contraction represents the 1st quarterly decline for Singapore office rents after nine straight quarters of office rental growth.
JLL Singapore’s Head of office leasing and advisory Andrew Tangye said the marginal drop of office rents in the city-state is due to ongoing economic pressures.
“The uncertain near-term outlook stemming from a combination of slowing economic growth, geopolitical tensions and rising prices have continued to keep occupiers wary and cost-conscious, resulting in weaker office space take-up.”
Another factor behind the rental contraction is that more office supply is being returned to the market “at an increasing pace” as more tenants downsize during lease renewals to slash costs.
JLL Singapore’s Research Head Tay Huey Ying agrees with Tangye’s observation. She also noted that the fall in office rents here became more widespread in the 3rd quarter. “Our analysis shows that more than 15 assets commanded lower rents in Q3 2023 than in Q2 2023, which dragged down the average rents for CBD Grade A space for the first time since they turned around in Q2 2021.”
Looking ahead, Tay expects Singapore office rents to correct further in the coming months as the downward pressure intensifies amidst the incoming office stock and current macroeconomic environment.
“Against the backdrop of an influx of upcoming projects competing for a limited pool of tenants, the short-term oversupply of office space could become more pronounced,” she explained.
Three office developments are poised to be completed in Singapore’s central business district (CBD) in the next 24 months. Keppel South Central will add 0.6 million sq ft of office space in 2024, while IOI Central Boulevard Towers will generate 1.3 million sq ft. Then by early-2025, the redeveloped Shaw Tower will have 0.4 million sq ft of office space. JLL disclosed that so far, more than 1.5 million sq ft of the upcoming office supply remains uncommitted.
Nonetheless, JLL thinks that the medium-term prospects of Singapore’s Grade A CBD office market remain promising thanks to city-state’s growing reputation as a global hub, while the supply of office space in the CBD will remain limited due to a dearth of greenfield sites.