Singapore Office Rents Up 5.1% In Q1

SINGAPORE – Rents of office space in the city-state’s central region rose by 5.1 percent quarter-on-quarter during the first three months of the year – the same quarterly increase recorded in Q4 2022, according to the URA’s 1st Quarter 2023 Real Estate Statistics published on Friday (28 April, SGT).

On a year-on-year basis, Singapore office rents have climbed by 15.54 percent in Q1 2023.

The robust office rental growth in the central region comes as the total office supply in the pipeline dipped 4.0 percent to 837,000 sq m in terms of gross floor area (GFA) during the first three months of the year from 872,000 sq m in Q4 2022. In the first quarter of last year, the upcoming office stock was 834,000 sq m.

Another positive development is that in Q1 2023 the office vacancy rate in Singapore’s central region slid to 11.2 percent compared to 11.3 percent in the preceding quarter and 12.8 percent in Q1 2022.

URA revealed that the amount of occupied office space in Singapore’s central region rose by 21,000 sq m (nett) during the first quarter of the year. In comparison, the amount of occupied office space in Q4 2022 increased by only 9,000 sq m, while that in Q1 2022 dropped by 13,000 sq m.

As for the selling prices or the capital values of office buildings, it remained unchanged in Q1 2023 on a quarterly basis. But on a year-on-year basis, the capital values fell by 4.29 percent.

Meanwhile, data from Edmund Tie showed that office rents in Singapore’s fringe areas increased by 8.8 percent quarter-on-quarter in Q1 2023, reversing the 4.0 percent contraction seen in Q4 2022, according to a report from The Business Times that was updated on Tuesday morning (2 May, ST).

“Given an uncertain economic outlook alongside tightened financing conditions, some cost-conscious tenants are looking at lower cost options outside the CBD. This could have driven office rents in the fringe area higher,” commented Wong Xian Yang, Head of Research at Cushman & Wakefield (C&W).

Looking ahead, office market watchers expect modest office rental growth as the tight supply situation continues, while companies rightsize as business sentiment remains cautious.

“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… backfilling of spaces vacated by relocating occupiers could take a little longer given the subdued sentiment,” noted Tay Huey Ying, Head of research and consultancy at Jones Lang LaSalle (JLL).

While the amount of shadow office space available has yet to impact rents, “if grown more widespread, landlords with more exposure may need to consider more competitive commercial terms to compete with the availability of such spaces”, added CBRE’s Research Head for Southeast Asia Tricia Song.