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Singapore office rents fall in 3Q2023 on weaker demand: JLL

/ EdgeProp Singapore |

September 25, 2023 6:11 PM SGT

JLL's research showed that gross effective rent for Grade A office space in the CBD fell 0.3% q-o-q to an average of $11.29 psf per month in 3Q2023.

SINGAPORE (EDGEPROP) - Singapore office rents declined in 3Q2023, according to data reported by JLL in a Sept 25 press release. The consultancy adds that it marks the first quarterly decline following nine consecutive quarters of office rental growth in the city-state.

JLL’s research shows that gross effective rent for Grade A office space in the CBD fell 0.3% q-o-q to an average of $11.29 psf per month in 3Q2023, down from $11.32 psf per month in 2Q2023.

Monthly gross effective rents for Grade A CBD Office space

Source: JLL Research

The decline comes from ongoing economic pressures, says Andrew Tangye, head of office leasing and advisory for JLL Singapore. “The uncertain near-term outlook stemming from a combination of slowing economic growth, geopolitical tensions and rising prices have continued to keep occupiers wary and cost-conscious, resulting in weaker office space take-up,” he adds.

He attributes the lower rents to more supply from office stock being returned to the market “at an increasing pace” as more occupiers right-size upon lease renewal to manage costs.

Tay Huey Ying, JLL Singapore’s head of research and consultancy, concurs, adding that office rent correction became more widespread this past quarter. “Our analysis shows that more than 15 assets commanded lower rents in 3Q2023 than in 2Q2023, which dragged down the average rents for CBD Grade A space for the first time since they turned around in 2Q2021.”

She anticipates downward pressure on office rents to intensify, with rents correcting further in the coming months amid the current macroeconomic environment and incoming office supply. “Against the backdrop of an influx of upcoming projects competing for a limited pool of tenants, the short-term oversupply of office space could become more pronounced,” she adds.

Three office projects are scheduled for completion in the CBD over the next 24 months — IOI Central Boulevard Towers (1.3 million sq ft) and Keppel South Central (0.6 million sq ft) in 2024, and the redeveloped Shaw Tower (0.4 million sq ft) in early 2025. JLL states that to date, over 1.5 million sq ft is estimated to be still uncommitted.

Beyond the short-term headwinds, the medium-term outlook for Singapore’s Grade A CBD office leasing market remains bright, JLL opines. Demand will be supported by Singapore’s burgeoning reputation as a global hub, while the supply of office space in the CBD will remain constrained by a lack of greenfield sites along with URA’s focus on injecting more live and play spaces downtown.

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