After 12 Consecutive Quarters on the Rise, Singapore Grade A Office Rental Growth Takes a Pause

Temporary increase in vacancies and options for tenants mitigate the upward pressure.

Singapore, June 27, 2024 -- After 12 consecutive quarters, the Singapore Core CBD (Grade A) office rental growth is finally taking a breather, according to CBRE Research. In Q2 2024, the average rental in this category of the most sought-after offices in Singapore remained at $11.95 psf/mth to end the streak when rents have hiked 14.9% over 3 years.

David McKellar, CBRE's Head of Office Services and Occupier Services, Singapore, explained, “With the completion of IOI Central Boulevard Towers and a significant number of upcoming lease expiries, we have observed that landlords are becoming aware that tenants have more options in the market. As a result they are prioritising occupancies in their buildings and are therefore more willing to negotiate on rents.”

Tricia Song, CBRE's Head of Research for Singapore and Southeast Asia, added, “Despite the tide seemingly swinging in the tenants’ favour, rents are still supported by the flight to quality. Discerning businesses that consider real estate strategy to be part of their talent attraction and retention efforts continue to demonstrate a strong preference for buildings with superior attributes, especially those that are located within the CBD.”
Tricia follows on her point by highlighting the positive net absorption in the Core CBD. Excluding 0.55 million square feet of committed space from IOI Central Boulevard Towers (Phase 1) which completed in Q2 2024, there was still some 0.17 million sf of net demand in the Core CBD (consisting of Marina Bay, Marina Centre, Raffles Place and Shenton Way micromarkets).

CBRE notes that firms in the Legal sector and some of the Chinese technology giants have been some of the biggest contributors towards the expanded demand this quarter. These sectors have shown strong demand, in spite of perceived macro-economic uncertainties.

David elaborates, “In the Legal sector, workplace transformations have prompted firms to reassess their space requirements, leading to relocations. Some are also finding the confidence in their growth prospects to transition from serviced offices and coworking spaces to establish a more permanent presence with their own dedicated office spaces.”

“Also, while technology companies have generally remained cautious with space requirements in Singapore, with some still consolidating their footprint, one Chinese technology company has bucked the trend and capitalised on the opportunity to relocate to a new enlarged space”, he added.

In spite of this pause in rental growth, CBRE Research maintains its original forecast of 2% to 3% growth in rents for Core CBD (Grade A) offices through 2024. Till date, Core CBD (Grade A) office rents have risen 0.4% in the first half of 2024.

“While the new completions have temporarily softened the upward pressure, we may see a pick-up in H2 2024 with leasing activity for new developments gaining momentum. Flight to quality and relocation activity from redevelopment projects and transitional sites will also drive demand. More importantly, beyond the expected completions this year, there are limited completions expected in 2025 to 2027. This is especially so for the CBD, where there are no expected new developments over this period. With the tight office market ahead, astute tenants will likely plan ahead and take this limited supply into consideration when they assess their space requirements in advance”, Tricia concluded.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

If you detect any issues, problems, or errors in this press release content, kindly contact [email protected] to notify us (it is important to note that this email is the authorized channel for such matters, sending multiple emails to multiple addresses does not necessarily help expedite your request). We will respond and rectify the situation in the next 8 hours.