CBRE reports that prime Grade-A office rents in 1Q2024 were up for the 12th consecutive quarter. Core CBD Grade-A office rents rose 0.4% in 1Q2024 to $11.95 psf. In total, rents have increased by 14.9% since 2021.

David McKellar, co-head of office and occupier services, attributes the rental growth to lease renewals at higher rates due to the limited supply of prime offices, elevated interest rates, and capital expenditure.

He notes that the vacancy rate in the core CBD area remains low, at 3.6%, partly aggravated by the delayed completion of the IOI Central Boulevard Towers – the only Grade A office slated to be completed this year.

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"Workplace transformations have led to relocations, especially for firms with smaller to mid-sized requirements, namely in the private wealth asset management, insurance, and legal sectors," adds McKellar. "Conversely though, sectors like traditional banking, technology, and agile space have adopted a more conservative stance in the quarter, mitigating some of the rental increase pressures."

The growth in Grade A office rents has also positively influenced Core CBD (Grade B) office rents. This sector recorded a 0.6% quarterly growth to $8.55 psf in 1Q2024, its first quarterly increase in a year.

However, some sectors may see some consolidation of space requirements, such as tech companies and banks – which form the major occupiers in Singapore's office market – that have recently announced layoffs.

CBRE's head of research for Singapore and Southeast Asia, Tricia Song, says the recent surge in layoffs could point to some volatility in shadow spaces or secondary spaces vacated upon lease expiry in the coming months.

Song expects Core CBD (Grade A) rents to grow by 2% to 3% in 2024, surpassing the 1.7% increase in 2023. This will be driven by the flight to quality trend, with a focus on sustainability as businesses continue to seek to upgrade to environmentally friendlier buildings.

She expects increased leasing activity among new developments in 2H2024 as completion dates draw near, with 3.4 million sq ft of office space completed over the next few years. However, she adds, landlords may be motivated to enhance occupancy by adjusting rental expectations and adopting more flexible deal structures.

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McKellar expects tenants to plan ahead and assess options to capitalise on the window of opportunity. "Beyond the expected completions this year, there are minimal completions expected in 2025 to 2027," he says. "This is especially so for the CBD, where there are no expected new developments over the period."