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Prime office rents holding up despite slowing economy: Knight Frank

/ EdgeProp Singapore |

October 19, 2023 5:51 PM SGT

According to Knight Frank Singapore, prime grade office rents in the Raffles Place and Marina Bay precinct rose 0.8% q-o-q in 3Q2023 to average at $11.05 psf per month (Picture: Albert Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) - Prime grade office rents in the Raffles Place and Marina Bay precinct rose 0.8% q-o-q in 3Q2023 to average at $11.05 psf per month, according to a quarterly office report by Knight Frank. “The slowing economy did not deter office rents from holding up, with prime office rents growing a moderate 3.4% in the first nine months of 2023,” says Calvin Yeo, managing director, occupier strategy and solutions at Knight Frank Singapore.

Occupancy levels in the Raffles Place and Marina Bay precinct along with the overall CBD also remained resilient, clocking in at 96% and 94.4% respectively in 3Q2023. In the previous quarter, occupancy stood at 95.8% and 94.1% respectively. Knight Frank highlights that most office occupiers in quality office buildings in the CBD were inclined to renew their rental contracts as it is more cost-efficient compared to relocating.

Additionally, Knight Frank observes that a number of banks have been sourcing for “modest expansion space”, despite larger international banks such as UBS and Standard Chartered announcing reductions in headcounts recently. Meanwhile, international firms continue to set up locations Singapore, with companies such as San Francisco-based global human resource firm Deel and Japanese firm Exeo Global opening regional offices in the city-state.

Looking ahead, prime office rents are expected to hold steady in the remaining months of the year as CBD office supply remains tight. “With no new office inventory expected to complete in the CBD until 2024, occupancy levels will remain firm, with very marginal rental upside,” comments Knight Frank’s Yeo. Knight Frank is maintaining its projection for office rents growing between 3% to 5% for the whole year.

The forecast is supported by a stable labour market, with a survey by the Manpower Group indicating 48% of respondents expect to increase headcount in the next few quarters. “Undergirded by a tight labour market, office tenants will continue to take holding positions by renewing or relocating their leases cautiously,” says Yeo.

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