SINGAPORE (EDGEPROP) - Core CBD premium and Grade-A office rents in 2Q2024 grew at a slower pace of 0.5% q-o-q to $11.63 psf per month, after a 0.7% q-o-q growth in 1Q2024, according to Colliers' latest office report.

Tridiana Ong, Colliers' executive director and head of office services, says the continued rental growth can be attributed to renewals at higher rents and the ability of some landlords to hold up their rents.

The only new office development completed this year is IOI Central Boulevard Towers. The 1.26 million sq ft of premium Grade-A office space spans two towers of 16- and 48-storeys. It obtained its temporary occupation permit (TOP) in early July. The building is 50% leased, with anchor tenants such as Amazon and Morgan Stanley.

Read also: Apac office occupiers still willing to pay higher rents for quality locations: Colliers

Colliers adds that landlords could be more tenant-friendly due to increasing competition and higher upcoming supply. Tenants are more likely to favour landlords who are more empathetic and approachable to their requirements.

The absorption of office space in 2Q2024 was 41,000 sq ft, up from -30,000 the previous quarter. According to Ong, no major new tenants have been looking for space in the market. Most tenants were looking for lease extensions or renewals, while some took the opportunity to relocate to a smaller footprint.

As major financial institutions and tech companies, which used to be the main drivers of office demand, continue to right-size, a more diversified pool of occupiers has emerged, with legal, professional services and energy firms propping up demand for office space. Most office space requirements are now below 10,000 sq ft.

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In May, Mapletree Pan Asia Commercial Trust sold Mapletree Anson, a Grade-A office building in the Core CBD, to Hong Kong-based private equity firm PAG for $775 million ($2,352 psf) and an exit yield of 3.8%. This transaction was an example of an opportunistic purchase from a REIT selling to reduce gearing and could lead to further pressure on Singapore office values, says Colliers.

“With the weight of capital waiting by the sidelines, this could pique the interest of investors into relooking at office assets,” says Colliers.

However, Income Insurance sold 30 Prinsep Street for $147 million ($3,000 psf) in April, and a freehold strata office on the ninth floor of the upcoming Solitaire at Cecil was sold for $51.48 million ($4,130 psf), reportedly to a Chinese buyer that same month. These two transactions demonstrate the strength of the rest of the office market, says Colliers, as well as the buying power of private wealth, which is largely unaffected by interest rate pressures.

Read also: Apac prime office rents fall 3.2% y-o-y in 1Q2024

Overall capital values in 2Q2024 have come off 1.6% to $3,050 psf, says Colliers, with the forecast for the full year to see growth of up to 3% to $3,100-$3,200 psf.